STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG CITIZENS BUSINESS BANK, WESTERN SECURITY BANCORP and WESTERN SECURITY BANK, NATIONAL ASSOCIATION May 3, 2002
AND PLAN OF REORGANIZATION
BY AND AMONG
CITIZENS BUSINESS BANK,
WESTERN SECURITY BANCORP and
WESTERN SECURITY BANK, NATIONAL ASSOCIATION
May 3, 2002
TABLE OF CONTENTS
Page
Article 1. DEFINITIONS....................................................2
Article 2. STOCK PURCHASE.................................................8
2.1 Purchase and Sale of the Western Stock............................8
2.2 Deliveries by Bancorp.............................................8
2.3 Deliveries by CBB.................................................9
2.4 Effect of Merger..................................................9
2.5 Directors of CBB Following the Merger.............................9
Article 3. THE CLOSING....................................................10
3.1 Closing...........................................................10
3.2 Execution of Agreements...........................................10
3.3 Further Assurances................................................10
Article 4. REPRESENTATIONS AND WARRANTIES OF BANCORP AND WESTERN..........10
4.1 Incorporation, Standing and Power.................................10
4.2 Capitalization....................................................11
4.3 Subsidiaries......................................................12
4.4 Financial Statements..............................................12
4.5 Material Liabilities..............................................12
4.6 Reports and Filings...............................................12
4.7 Authority.........................................................13
4.8 Conflicts.........................................................13
4.9 Taxes.............................................................14
4.10 Contracts.........................................................16
4.11 Title to Property.................................................18
4.12 Litigation........................................................19
4.13 Certain Adverse Change............................................20
4.14 Corporate Records.................................................20
4.15 Accounting Records; Data Processing...............................20
4.16 Insurance.........................................................21
4.17 Employee Benefit Plans and Employment and Labor Contracts.........21
4.18 Investments.......................................................24
4.19 Broker's or Finder's Fees.........................................24
4.20 Compliance with Rules.............................................25
4.21 Performance of Obligations........................................26
4.22 Employees.........................................................26
4.23 Certain Interests.................................................27
4.24 Extensions of Credit..............................................27
4.25 Operating Losses..................................................27
4.26 Powers of Attorney................................................27
4.27 Offices and ATMs..................................................27
4.28 Facts Affecting Regulatory Approvals..............................28
4.29 Accounting and Tax Matters........................................28
4.30 Indemnification...................................................28
4.31 Community Reinvestment Act........................................28
4.32 Bank Secrecy Act..................................................28
4.33 Derivative Transactions...........................................28
4.34 Trust Administration..............................................28
4.35 Intellectual Property.............................................29
4.36 Disclosure Documents and Applications.............................29
4.37 Licenses and Permits..............................................29
4.38 Insider Loans, Other Transactions.................................30
4.39 SBA Lending.......................................................30
4.40 Accuracy and Currentness of Information Furnished.................30
4.41 Effective Date of Representations and Warranties..................30
Article 5. REPRESENTATIONS AND WARRANTIES OF CBB..........................30
5.1 Incorporation, Standing and Power.................................30
5.2 Financial Statements..............................................31
5.3 Authority.........................................................31
5.4 No Conflicts; Defaults............................................31
5.5 Accuracy of Information Furnished.................................31
5.6 CRA Standing......................................................31
5.7 Regulatory Approvals..............................................31
5.8 Accuracy and Correctness of Information Furnished.................32
5.9 Effective Date of Representations and Warranties..................32
Article 6. COVENANTS OF BANCORP AND WESTERN PENDING EFFECTIVE TIME OF
THE SHARE PURCHASE.............................................32
6.1 Limitation on Conduct Prior to Effective Time of the Share
Purchase..........................................................32
6.2 Affirmative Conduct Prior to Effective Time of the Merger.........36
6.3 Access to Information.............................................37
6.4 Filings...........................................................38
6.5 Notices; Reports..................................................39
6.6 Bancorp Shareholders' Meeting.....................................39
6.7 Certain Loans and Other Extensions of Credit......................40
6.8 Applications......................................................41
6.9 Stock Purchase....................................................41
6.10 Merger............................................................41
6.11 Any Bancorp Subsidiary............................................42
6.12 Disposition of Employee Benefit Plans.............................42
6.13 Pre-Closing Adjustments...........................................42
6.14 Disposition of Assets.............................................42
6.15 Prepayment of Notes...............................................42
6.16 Salary Continuation Agreements....................................42
6.17 Employment Agreements.............................................43
6.18 Lease for Branch..................................................43
6.19 Insurance Coverage................................................43
6.20 Repayment of WSPI Obligation.....................................43
6.21 Sale of WSPI......................................................44
6.22 Western Dividend..................................................44
Article 7. COVENANTS OF CBB PENDING EFFECTIVE TIME OF THE STOCK PURCHASE..44
7.1 Limitation on Conduct Prior to Effective Time of the Stock
Purchase..........................................................44
7.2 Applications......................................................44
7.3 Notices; Reports..................................................44
7.4 Regulatory Proceedings Regarding CBB..............................44
Article 8. ADDITIONAL COVENANTS...........................................45
8.1 Best Efforts......................................................45
8.2 Public Announcements..............................................45
8.3 Environmental Assessment and Remediation..........................45
Article 9. TAX MATTERS....................................................46
9.1 Tax Returns.......................................................46
9.2 Apportionment of Taxes............................................47
9.3 Refunds...........................................................47
9.4 Cooperation, Audits...............................................47
9.5 Controversies.....................................................48
9.6 Amended Returns...................................................49
9.7 Non-foreign Person Affidavit......................................49
Article 10. CONDITIONS PRECEDENT TO THE STOCK PURCHASE.....................49
10.1 Shareholder Approval..............................................49
10.2 No Judgments or Orders............................................49
10.3 Regulatory Approvals..............................................49
Article 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BANCORP AND WESTERN.50
11.1 Legal Opinion.....................................................50
11.2 Representations and Warranties; Performance of Covenants..........50
11.3 Authorization of Stock Purchase and Merger........................50
11.4 Western Dividend..................................................50
11.5 Officers' Certificate.............................................50
Article 12. CONDITIONS PRECEDENT TO OBLIGATIONS OF CBB.....................51
12.1 Legal Opinion.....................................................51
12.2 Representations and Warranties; Performance of Covenants..........51
12.3 Authorization of Stock Purchase and Merger........................51
12.4 Regulatory Approvals and Related Conditions.......................51
12.5 Third-Party Consents..............................................51
12.6 Absence of Certain Changes........................................51
12.7 Shareholder's Agreements..........................................52
12.8 Agreements Not to Solicit.........................................52
12.9 Employee Benefit Plans; Salary Continuation Agreements and
Employment Agreements.............................................52
12.11 Resignations......................................................52
12.12 Disposition of Assets.............................................52
12.13 Loan Loss Reserve.................................................52
12.14 Deposits and Loans................................................52
12.15 Tax Opinion.......................................................53
12.16 Expense Report....................................................53
12.17 Lease for Branch..................................................53
12.18 Audited Financials................................................53
12.19 Tail Insurance Coverage...........................................53
12.20 Notes.............................................................53
12.21 MOU...............................................................53
12.22 Purchase of WSPI..................................................54
12.23 Western Dividend..................................................54
12.24 Officers' Certificate.............................................54
Article 13. EMPLOYEE BENEFITS..............................................54
13.1 Employee Benefits.................................................54
Article 14. TERMINATION....................................................54
14.1 Termination.......................................................54
14.2 Effect of Termination; Liquidated Damages; Expenses...............56
14.3 Force Majeure.....................................................56
Article 15. INDEMNIFICATION................................................57
15.1 Indemnification by Bancorp........................................57
15.2 Indemnification by CBB............................................58
15.3 Indemnification Procedures........................................58
15.4 Indemnification Non-Exclusive.....................................59
15.5 Indemnification in Case of Strict Liability or Indemnitee
Negligence........................................................59
Article 16. MISCELLANEOUS..................................................60
16.1 Notices...........................................................60
16.2 Successors and Assigns............................................60
16.3 Counterparts......................................................61
16.4 Effect of Representations and Warranties..........................61
16.5 Third Parties.....................................................61
16.6 Lists; Exhibits; Integration......................................61
16.7 Knowledge.........................................................61
16.8 Governing Law.....................................................61
16.9 Captions..........................................................61
16.10 Confidentiality...................................................61
16.11 Severability......................................................62
16.12 Waiver and Modification; Amendment................................62
16.13 Attorneys' Fees...................................................62
16.14 Alternative Structure.............................................62
STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
THIS STOCK PURCHASE AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and entered into
as of the 3rd day of May 2002, by and among CITIZENS BUSINESS BANK, a California banking corporation ("CBB"),
on the one hand, and WESTERN SECURITY BANCORP, a California corporation ("BANCORP") and WESTERN SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association ("WESTERN"), on the other hand.
WHEREAS, the Parties originally entered into an Agreement and Plan of Reorganization on January
17, 2002 providing for the merger of Bancorp and Western with and into CBB;
WHEREAS, the Parties desire to amend and restate that Agreement and Plan of Reorganization
through this Agreement to provide for the acquisition of Western by CBB through a stock purchase (the "Stock
Purchase") of all of the outstanding shares of Western followed immediately by the merger (the "Merger") of
Western with and into CBB pursuant to the Agreement of Merger, substantially in the form of Exhibit A;
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WHEREAS, immediately prior to the Stock Purchase, Bancorp shall purchase Western S.P. Inc. from
Western and Western shall make a cash dividend to Bancorp, all as described herein;
WHEREAS, references in this Agreement to the "date of execution of this Agreement" or "from the
date of execution of this Agreement" or "as of the date of execution of this Agreement" with respect to the
representations and warranties, covenants and conditions contained herein shall refer to January 17, 2002;
WHEREAS, the Parties deem it advisable and in the best interests of their respective
shareholders to provide for the acquisition by CBB of Western subject to the terms and conditions specified
herein as follows:
WHEREAS, the acquisition of Western by CBB through the Stock Purchase is intended to constitute
a qualified stock purchase within the meaning of Section 338 of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Merger is intended to qualify as a tax-free subsidiary liquidation within the meaning of
Section 352 of the Code.
NOW, THEREFORE, on the basis of the foregoing recitals and in consideration of the mutual
covenants, agreements, representations and warranties contained herein, the parties hereto do covenant and agree
as follows:
Article 1.
DEFINITIONS
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Except as otherwise expressly provided for in this Agreement, or unless the context otherwise
requires, as used throughout this Agreement the following terms shall have the respective meanings specified
below:
"Affiliate" of, or a Person "Affiliated" with, a specific Person(s) is a Person that directly
or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control
with, the Person(s) specified.
"Affiliated Group" means, with respect to any entity, a group of entities required or permitted
to file consolidated, combined or unitary Tax Returns (as defined herein).
"Agreement of Merger" has the meaning set forth in the second recital of this Agreement.
"Ancillary Agreements" shall mean the WSPI Purchase Agreement, the WSCDC Asset Sale Agreement
and the CBB Lease Agreement.
"Bancorp Shareholders' Meeting" means the meeting of Bancorp's shareholders referred to in
Section 6.6.
"Bancorp Schedule" means any schedule or list required to be furnished by Bancorp, Western and
the Bancorp Subsidiaries to CBB herewith.
"Bancorp Stock" means the common stock, no par value, of Bancorp.
"Bancorp Subsidiaries" means WSAC, WSCDC, WSFC, WSMC and WSPI, the direct and indirect
subsidiaries of Bancorp.
"Bancorp Supplied Information" has the meaning set forth in Section 4.36.
"Benefit Arrangements" has the meaning set forth in Section 4.17.
"BHC Act" means the Bank Holding Company Act of 1956, as amended.
"Business Day" means any day other than a Saturday, Sunday or day on which a bank chartered
under the laws of the State of California is closed.
"CBB" means Citizens Business Bank, a California banking corporation.
"CBB Lease Agreement" has the meaning set forth in Section 6.18.
"CFC" means the California Financial Code.
"CGCL" means the California General Corporation Law.
"Charter Documents" shall mean the articles of incorporation, articles of association and
bylaws of the relevant entity.
"Classified Credits" has the meaning set forth in Section 6.7.
"Closing" means the consummation of the Stock Purchase provided for in Article 2 of this
Agreement on the Closing Date (as defined herein) at the offices of Manatt, Xxxxxx & Xxxxxxxx, LLP, 00000 Xxxx
Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, or at such other place as the parties may agree upon.
"Closing Date" means the last Business Day of the month in which the last of the following
events occur: (i) the approval of this Agreement and the transactions contemplated hereby by the shareholders of
Bancorp, (ii) the receipt of all permits, authorizations, approvals and consents specified in Section 9.2 hereof,
(iii) the expiration of the 30-day period following delivery of notice to Bancorp shareholders of approval by the
Bancorp shareholders of the transactions contemplated hereby pursuant to Section 1304 of the CGCL and (iv) the
expiration of all applicable notice and waiting periods under the law, or such other date agreed to by the
Parties;
"Code" shall have the meaning set forth in the second recital of this Agreement.
"Commissioner" means the Commissioner of the Department of Financial Institutions of the State
of California.
"Competing Transaction" has the meaning set forth in Section 6.1.14.
"Comptroller" means the Comptroller of the Currency.
"Confidential Information" shall mean all information heretofore or hereafter provided by
Bancorp or Western to CBB or obtained from CBB by Bancorp or Western, which is information related to the
business, financial condition or operations of Bancorp, Western or the Bancorp Subsidiaries (such information to
include, by way of example only and not of limitation, client lists, pricing information, company manuals,
internal memoranda, strategic plans, budgets, forecasts, projections, computer models and any information that
(i) at the time of disclosure or thereafter is generally available to and known by the public (other than as a
result of a disclosure directly or indirectly by CBB or any of its officers, directors, employees or other
representatives), (ii) was available to CBB on a nonconfidential basis from a source other than Bancorp or
Western, provided that to the knowledge of CBB such source learned the information independently and is not and
was not bound by a confidentiality agreement with respect to the information, or (iii) has been independently
acquired or developed by CBB without violating any obligations under this Agreement.
"Consents" shall mean every consent, approval, absence of disapproval, waiver or authorization
from, or notice to, or registration or filing with, any Person.
"Covered Person" has the meaning set forth in Section 4.30.
"CRA" shall mean the Community Reinvestment Act.
"Current Executives" has the meaning set forth in Section 6.16
"CVB" means CVB Financial Corp., a California corporation and bank holding company for CBB.
"Deloitte & Touche" means Deloitte & Touche, LLP, CBB's independent accountants.
"DFI" means the Department of Financial Institutions of the State of California.
"Effective Time of the Merger" means the date upon which the Merger is consummated and the
Agreement of Merger, bearing the certification of the California Secretary of State, is filed with the
Commissioner of Financial Institutions.
"Employee Benefit Plans" has the meaning set forth in Section 4.17.
"Employment Agreements" has the meaning set forth in Section 6.17.
"Encumbrance" shall mean any option, pledge, security interest, lien, charge, encumbrance or
restriction (whether on voting or disposition or otherwise), whether imposed by agreement, understanding, law or
otherwise.
"Environmental Regulations" has the meaning set forth in Section 4.20.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 4.17.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expenses" shall mean all reasonable out-of-pocket expenses (including all fees and expenses of
attorneys, accountants, investment bankers, experts and consultants to the party and its affiliates) incurred by
the Party or on its behalf in connection with consummation of the transactions contemplated by the Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Statements of CBB" means (i) the unaudited consolidated financial statements of CBB
consisting of the consolidated balance sheets as of December 31, 1999, 2000 and 2001, and the related
consolidated statements of operations, shareholders' equity and cash flows for the years then ended and the
related notes thereto and related opinions thereon for the years then ended.
"Financial Statements of Bancorp" means (i) the audited consolidated financial statements of
Bancorp consisting of the consolidated statements of condition as of December 31, 1999, 2000, 2001 and the
related statements of operations, stockholders' equity and cash flows for the years then ended and the related
notes thereto and related opinions thereon for the periods then ended; (ii) the unaudited financial statements of
Western and each of the Bancorp Subsidiaries as of December 31, 1999, 2000 and 2001 and the related statements of
operations, stockholders' equity and cash flows for the years then ended, and (iii) the unaudited financial
statements of Bancorp and Western and each of the Bancorp Subsdiaries as of March 31, 2002 and the related
statements of operations, stockholders' equity and cash flows for the period then ended.
"FRB" means the Board of Governors of the Federal Reserve System.
"Governmental Entity" shall mean any court or tribunal with jurisdiction over the relevant
party, or any United States federal, state, municipal, domestic, foreign or other administrative agency,
department, commission, board or other regulatory or governmental authority or instrumentality.
"Hazardous Materials" has the meaning set forth in Section 4.20.
"H&B" means Xxxxxxxxxx and Bloodgood, LLP, Bancorp's and Western's independent accountants.
"Immediate Family" means a person's spouse, parents, in-laws, children and siblings.
"Investment Security" means any equity security or debt security as defined in Statement of
Financial Accounting Standards No. 115.
"IRS" means the Internal Revenue Service.
"Losses" shall mean all damages, awards, costs, judgments, payments, diminutions in value and
other losses, however suffered or characterized, all interest thereon, all costs and expenses of investigating
any claim, lawsuit or arbitration and any appeal therefrom; all actual attorney's fees incurred in connection
therewith, whether or not such claim, lawsuit or arbitration is ultimately defeated and, subject to Section 15.3
hereof, all amounts paid incident to any compromise or settlement of any such claim, lawsuit or arbitration.
"Merger" has the meaning set forth in the second recital of the Agreement.
"MOU" shall mean the Memorandum of Understanding between Western and the OCC, dated as of
September 19, 2001.
"Named Executives" has the meaning set forth in Section 6.16.
"Note Agreements" shall mean the Note and Agency Agreement between Bancorp and PHS Mortgage,
Inc., the Pledge Agreement between Bancorp and PHS Mortgage, Inc., both dated December 23, 1998, and the
Placement Agency Agreement between Bancorp and Peacock, Hislop, Xxxxxx & Given, Inc., dated as of December 8,
1998.
"Notes" means the $5,000,000 of principal outstanding notes of Bancorp issued pursuant to the
Note Agreements.
"OCC" means the Office of the Comptroller of the Currency.
"Operating Loss" has the meaning set forth in Section 4.25.
"Overlap Period Returns" has the meaning set forth in Section 9.1.
"Party" shall mean either of CBB, Bancorp or Western, as the context may dictate, and "Parties"
shall mean all of CBB, Bancorp and Western.
"Permit" means any United States federal, foreign, state, local or other license, permit,
franchise, certificate of authority, order or approval necessary or appropriate under any applicable Rule.
"Person" means any individual, corporation, association, partnership, limited liability
company, trust, joint venture, other entity, unincorporated body, government or governmental department or agency.
"Plans" has the meaning set forth in Section 4.17.
"Pre-Closing Returns" has the meaning set forth in Section 9.1.
"Proxy Statement" means the Proxy Statement or consent solicitation used to obtain the vote of
Bancorp Shareholders to approve the Stock Purchase and the transactions contemplated hereby.
"Purchase Price" means $6,225,000.
"Related Group of Persons" means Affiliates, members of an Immediate Family or Persons the
obligations of whom would be attributed to another Person pursuant to the regulations promulgated by the SEC (as
defined herein).
"Representatives" has the meaning set forth in Section 6.3.
"Rule" shall mean any statute or law or any judgment, decree, injunction, order, regulation or
rule of any Governmental Entity, including, without limitation, those relating to disclosure, usury, equal credit
opportunity, equal employment, fair credit reporting and anticompetitive activities.
"Salary Continuation Agreements" has the meaning set forth in Section 6.16.
"Schedule" means the schedules delivered pursuant to this Agreement.
"Scheduled Contracts" has the meaning set forth in Section 4.10.
"Stock Purchase" has the meaning set forth in the second recital of this Agreement.
"Subordinated Notes" means the notes outstanding to Xxxx Xxxx, Xxxxxx X. Xxxxxx, Xxxxxx XxXxxxx
and Xxxxx Xxxxxxxx in the principal amount of $1,195,593.84 as of March 31, 2002.
"Surviving Corporation" means the corporation surviving the Merger.
"Surviving Corporation Stock" means the common stock, no par value, of the Surviving
Corporation.
"Tail Insurance Coverage" shall have the meaning specified in Section 6.19.
"Tanks" has the meaning set forth in Section 4.20.
"Tax Matters" has the meaning set forth in Section 9.5.
"Tax Returns" means all returns, declarations, reports, estimates, information returns and
statements required to be filed in respect of any Taxes.
"Taxes" means (i) all federal, state, local or foreign taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation, property, corporation and
estimated taxes, custom duties, fees, assessments and charges of any kind whatsoever; (ii) all interest,
penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any
item described in clause (i); and (iii) any transferred liability in respect of any items described in clauses
(i) and/or (ii).
"Transaction Costs" means all expenses, costs and fees paid or incurred by Bancorp, Western or
the Bancorp Subsidiaries in connection with the transactions described herein, including, without limitation (a)
legal, accounting, investment banker, advisory and other professional fees and costs; (b) in respect of the
termination or cancellation of any agreements to which Bancorp, Western or the Bancorp Subsidiaries are a party,
(c) in respect of any benefit, severance or retention payments to employees or directors of Bancorp, Western or
the Bancorp Subsidiaries or any property transferred to such Person(s), including, without limitation, any
Western owned automobiles.
"Understanding" means any contract, agreement, understanding, commitment or offer, whether oral
or written, which may become a binding obligation if accepted by another Person.
"WSAC" means Western Security Acceptance Corporation, a California corporation and subsidiary
of Western.
"WSFC" means Western Security Finance Corporation, a California corporation and subsidiary of
Western.
"WSMC" means Western Security Management Company, a California corporation and subsidiary of
Bancorp.
"WSCDC" means Western Security Community Development Corporation, a California corporation and
subsidiary of Western.
"WSCDC Asset Sale Agreement" has the meaning set forth in Section 6.14.
"WSPI" means Western S.P., Inc., a California corporation and subsidiary of Western.
"WSPI Purchase Agreement" has the meaning set forth in Section 6.21.
"WSPI Repayment" has the meaning set forth in Section 6.20.
"Western" means Western Security Bank, National Association, a national banking association and
wholly-owned Subsidiary of Bancorp.
"Western Dividend" means the cash dividend by Western to Bancorp in the principal amount of the
Notes and the Subordinated Notes plus all accrued interest as of the date of such dividend.
"Western Stock" means the common stock, $5.00 par value, of Western.
"Western Subsidiaries" means WSAC, WSFC, WSCDC and WSPI.
Article 2.
STOCK PURCHASE
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2.1 Purchase and Sale of the Western Stock. At the Closing, Bancorp shall sell, assign, transfer and
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convey to CBB all of its right, title and interest in and to the Western Stock, free and clear of all
Encumbrances. At the Closing, CBB shall purchase and acquire such Western Stock and deliver to Bancorp the
Purchase Price. CBB shall not assume or be liable for any liabilities or obligations of Bancorp, WSCDC, WSMC or
WSPI, whether the same are direct or indirect, fixed, contingent or otherwise, known or unknown, whether existing
at the Closing Date or arising thereafter as a result of any act, omission or circumstance taking place prior to
the Closing Date.
2.2 Deliveries by Bancorp. At or prior to the Closing, Bancorp shall deliver to CBB the following:
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(a) Certificates evidencing the shares of Western Stock, which certificates shall be duly endorsed in blank
or accompanied by duly executed stock powers;
(b) The certificates, agreements, documents and consents referred to in Article 12 herein;
(c) Resignations of all the directors and officers of Western and the Western Subsidiaries referred to in
Section 12.12 herein;
(d) All financial, accounting, stock and corporate books and records of Western and the Western
Subsidiaries, and any other books or records relating to the business of Western and the Western Subsidiaries as
CBB shall request;
(e) True and correct copies of the Charter Documents of Western and the Western Subsidiaries; and
(f) Certificates of good standing for Western and the Western Subsidiaries from the Comptroller of the
Currency, the California Secretary of State and the Franchise Tax Board, as appropriate.
2.3 Deliveries by CBB. At or prior to the Closing, CBB shall deliver to Bancorp the following:
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(a) Wire transfer in the amount of the Purchase Price to an account designated in writing by Bancorp;
(b) The certificates, agreements and documents referred to in Article 11 herein.
2.4 Effect of Merger. At the Effective Time of the Merger, which shall occur immediately after the Stock
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Purchase, Western will be merged with and into CBB pursuant to the terms, conditions and provisions of the
Agreement of Merger and in accordance with the applicable provisions of the CGCL and the CFC, with CBB as the
Surviving Corporation. By virtue of the Merger, all the rights, privileges, powers and franchises and all
property and assets of every kind and description of Western and CBB shall be vested in and be held by CBB,
without further act or deed, and all the interests of every kind of Western and CBB, including all debts due to
either of them on whatever account, shall be the property of CBB as they were of Western and CBB and the title to
any interest in real property and any interest in personal property vested by deed or otherwise in Western and
CBB shall not revert or be in any way impaired by reason of the Merger; and all rights of creditors and liens
upon any property of Western and CBB shall be preserved unimpaired and all debts, liabilities and duties of
Western and CBB shall be preserved unimpaired and all debts, liabilities and duties of Western and CBB shall be
debts, liabilities and duties of CBB and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
2.5 Directors of CBB Following the Merger. Immediately after the Effective Time of the Merger, the Board of
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Directors of CBB shall be comprised of the persons serving as directors of CBB immediately prior to the Effective
Time of the Merger. Such persons shall serve until the earlier of their expiration or removal or until their
successors are duly elected and qualified.
Article 3.
THE CLOSING
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3.1 Closing. The Closing shall take place on the Closing Date.
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3.2 Execution of Agreements. As soon as practicable after execution of this Agreement, the Agreement of
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Merger, (as amended, if necessary, to conform to any requirements of any Governmental Entity having authority
over such merger(s)) together with all other agreements necessary to consummate the transactions described
herein, shall be executed by the parties thereto. On the Closing Date, the Agreement of Merger, together with
all requisite certificates, shall be duly filed with the California Secretary of State and the Commissioner, in
accordance with the CGCL and the CFC.
3.3 Further Assurances. At the Closing, the Parties hereto shall deliver, or cause to be delivered, such
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documents or certificates as may be necessary in the reasonable opinion of counsel for any of the parties, to
effectuate the transactions contemplated by this Agreement. If, at any time after the Effective Time of the
Stock Purchase, or after the Effective Time of the Merger, the Surviving Corporation or a successor or assign
shall determine that any further conveyance, assignment, or other documents or any further action is necessary or
desirable to further effectuate the transactions set forth herein or contemplated hereby, the officers and
directors of the Parties shall execute and deliver, or cause to be executed and delivered, all such documents as
may be reasonably required to effectuate such transactions.
Article 4.
REPRESENTATIONS AND WARRANTIES OF BANCORP AND WESTERN
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Bancorp and Western, jointly and severally, represent and warrant to CBB as follows:
4.1 Incorporation, Standing and Power. Bancorp has been duly organized, is validly existing and in good
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standing as a corporation under the laws of the State of California and is registered as a bank holding company
under the BHC Act. Western is a national bank duly organized, validly existing and in good standing under the
laws of the United States and is authorized by the OCC to conduct a national banking business. Each of the
Western Subsidiaries has been duly organized, is validly existing and in good standing as a corporation under the
laws of the State of California. Western's deposits are insured by the FDIC in the manner and to the fullest
extent provided by law. Each of Bancorp, Western and the Western Subsidiaries has all requisite corporate power
and authority to own, lease and operate its respective properties and assets and to carry on its business as
presently conducted. Neither the scope of the business of Bancorp, Western or any of the Western Subsidiaries
nor the location of any of their respective properties requires that either Bancorp, Western or any of the
Western Subsidiaries be licensed to do business in any jurisdiction other than the State of California where the
failure to be so licensed would, individually or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations or prospects of Western on a consolidated basis. Bancorp
has delivered to CBB true and correct copies of its, Western's and each of the Western's Subsidiaries' Articles
of Incorporation, Articles of Association, and Bylaws, as in effect as of the date hereof.
4.2 Capitalization.
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4.2.1 As of the date of this Agreement, the authorized capital stock of Western consists of forty thousand
(40,000) shares of common stock, $5.00 par value, of which forty thousand (40,000) shares are issued and
outstanding and all of which are owned of record and beneficially by Bancorp. All of the outstanding shares of
such common stock are duly authorized, validly issued, fully paid, nonassessable and free and clear of all
Encumbrances. There are no outstanding options, warrants or other rights in or with respect to the unissued
shares of such common stock or any other securities convertible into such stock, and Western is not obligated to
issue any additional shares of its common stock or any options, warrants or other rights in or with respect to
the unissued shares of its common stock or any other securities convertible into such stock.
4.2.2 As of the date of this Agreement, the authorized capital stock of WSAC consists of one million
(1,000,000) shares of common stock, of which five hundred thousand (500,000) shares are issued and outstanding
and all of which are owned of record and beneficially by Western. All of the outstanding shares of such common
stock are duly authorized, validly issued, fully paid, nonassessable and free and clear of all Encumbrances.
There are no outstanding options, warrants or other rights in or with respect to the unissued shares of such
common stock or any other securities convertible into such stock, and is not obligated to issue any additional
shares of its common stock or any options, warrants or other rights in or with respect to the unissued shares of
its common stock or any other securities convertible into such stock.
4.2.3 As of the date of this Agreement, the authorized capital stock of WSFC consists of one hundred thousand
(100,000) shares of common stock, of which fifty thousand (50,000) shares are outstanding and all of which are
owned of record and beneficially by Western. All of the outstanding shares of such common stock are duly
authorized, validly issued, fully paid, nonassessable and free and clear of all Encumbrances. There are no
outstanding options, warrants or other rights in or with respect to the unissued shares of such common stock or
any other securities convertible into such stock, and WSFC is not obligated to issue any additional shares of its
common stock or any options, warrants or other rights in or with respect to the unissued shares of its common
stock or any other securities convertible into such stock.
4.2.4 As of the date of this Agreement, the authorized capital stock of WSCDC consists of one million
(1,000,000) shares of common stock, of which five hundred thousand (500,000) shares are outstanding and all of
which are owned of record and beneficially by Western. All of the outstanding shares of such common stock are
duly authorized, validly issued, fully paid, nonassessable and free and clear of all Encumbrances. There are no
outstanding options, warrants or other rights in or with respect to the unissued shares of such common stock or
any other securities convertible into such stock, and WSCDC is not obligated to issue any additional shares of
its common stock or any options, warrants or other rights in or with respect to the unissued shares of its common
stock or any other securities convertible into such stock.
4.2.5 As of the date of this Agreement, the authorized capital stock of WSPI consists of one million shares
(1,000,000) of common stock, of which five hundred thousand (500,000) shares are outstanding and all of which are
owned of record and beneficially by Western. All of the outstanding shares of such common stock are duly
authorized, validly issued, fully paid, nonassessable and free and clear of all Encumbrances. There are no
outstanding options, warrants or other rights in or with respect to the unissued shares of such common stock or
any other securities convertible into such stock, and WSPI is not obligated to issue any additional shares of its
common stock or any options, warrants or other rights in or with respect to the unissued shares of its common
stock or any other securities convertible into such stock.
4.3 Subsidiaries. Other than Western, WSAC, WSFC, WSCDC, WSMC and WSPI, Bancorp and Western do not own,
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directly or indirectly, the outstanding stock or equity or other voting interest in any Person.
4.4 Financial Statements. Bancorp has delivered to CBB a true and correct copy of the Financial Statements
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of Bancorp. Bancorp has also delivered to CBB true and correct copies of each management letter or other letter
delivered to Bancorp or Western by H&B in connection with the Financial Statements of Bancorp or relating to any
review of the internal controls of Bancorp or Western by H&B since January 1, 1998. The Financial Statements of
Bancorp: (a) present fairly the consolidated financial condition of Bancorp, Western and the Bancorp
Subsidiaries, respectively, as of the respective dates indicated and their respective consolidated results of
operations and statements of cash flows, for the respective periods then ended, subject, in the case of the
unaudited interim financial statements, to normal recurring adjustments; (b) have been prepared in accordance
with generally accepted accounting principles and/or applicable regulatory accounting principles or banking
regulations consistently applied (except as otherwise indicated therein); (c) set forth as of the respective
dates indicated adequate reserves for loan losses and other contingencies and (d) are based upon the books and
records of Bancorp, Western and the Bancorp Subsidiaries, respectively.
4.5 Material Liabilities. Schedule 4.5 sets forth all material liabilities of
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Bancorp, Western and the Western Subsidiaries, contingent or otherwise, that are not reflected or reserved
against in the Financial Statements of Bancorp, dated as of December 31, 2001, except for liabilities incurred or
accrued since December 31, 2001 in the ordinary course of business, none of which has had or may reasonably be
expected to have a material adverse effect on the business, financial condition, results of operations or
prospects of Western on a consolidated basis. Except as set forth on Schedule 4.5, Bancorp and Western know of
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no basis for the asserting against Western or any Western Subsidiary of any liability, obligation or claim that
may reasonably be expected to have a material adverse effect on the business, financial condition, results of
operations or prospects of Western or any Western Subsidiary.
4.6 Reports and Filings. Except as set forth on Schedule 4.6, since January 1, 1998, each of Bancorp,
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Western and the Western Subsidiaries has filed all reports, returns, registrations and statements (such reports
and filings referred to as "Bancorp Filings"), together with any amendments required to be made with respect
thereto, that were required to be filed with (a) the FDIC, (b) the OCC, (c) the FRB, and (d) any other applicable
Governmental Entity, including taxing authorities, except where the failure to file such reports, returns,
registrations or statements has not had and is not reasonably expected to have a material adverse effect on the
business, financial condition, results of operations or prospects of Western on a consolidated basis. No
administrative actions have been taken or orders issued in connection with such Bancorp Filings. As of their
respective dates, each of such Bancorp Filings (y) complied in all material respects with all laws and
regulations enforced or promulgated by the Governmental Entity with which it was filed (or was amended so as to
be in compliance promptly following discovery of any such noncompliance); and (z) did not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading. Any financial
statement contained in any of such Bancorp Filings fairly presented the financial position of Bancorp on a
consolidated basis, Bancorp alone, Western on a consolidated basis and Western alone, as the case may be, and was
prepared in accordance with generally accepted accounting principles or banking regulations consistently applied,
except as stated therein, during the periods involved, and except where any misstatement or omission would not
make the statements therein, in light of the circumstances under which they were made, misleading. Bancorp has
furnished CBB with true and correct copies of all Bancorp Filings since January 1, 1998.
4.7 Authority. The execution and delivery by Bancorp of this Agreement and by Western of this Agreement,
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the Agreement of Merger, and the execution and delivery by Bancorp and Western of the Ancillary Agreements, as
appropriate, subject to the requisite approval of the shareholders of Bancorp of this Agreement and the
transactions contemplated thereby, and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part of Bancorp, Western and WSPI.
This Agreement is, and the Agreement of Merger and the Ancillary Agreements will be, upon due execution and
delivery by the respective parties thereto, a valid and binding obligation of Bancorp and Western, as the case
may be, enforceable in accordance with their respective terms, except as the enforceability thereof may be
limited by bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium or other similar laws
affecting the rights of creditors generally and by general equitable principles.
4.8 Conflicts. Except as set forth on Schedule 4.8, neither the execution and delivery by Bancorp of this
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Agreement, nor by Western of the Agreement of Merger nor by either Bancorp or Western of the Ancillary
Agreements, as appropriate, the consummation of the transactions contemplated herein or therein, nor compliance
by Bancorp or Western with any of the provisions hereof or thereof, will: (a) conflict with or result in a
breach of any provision of Bancorp's or Western's Articles of Incorporation, as amended, Articles of Association,
as amended, or Bylaws, as amended; (b) constitute a breach of or result in a default or loss of any benefit
under, (or give rise to any rights of termination, modification, cancellation or acceleration, or any right to
acquire any securities or assets) under any of the terms, conditions or provisions of any note, bond, contract,
mortgage, indenture, franchise, license, permit, agreement or other instrument or obligation to which Bancorp or
Western is a party, or by which Bancorp or Western or any of their respective properties or assets are bound;
(c) except for the prior approval of the FDIC, the OCC, the Commissioner and the FRB, and the filing of the
Agreement of Merger with the California Secretary of State and the Commissioner require any Consents; (d) result
in the creation or imposition of any Encumbrance on any of the properties or assets of Bancorp, Western or the
Western Subsidiaries; or (e) subject to obtaining the Consents referred to in subsection (c) of this Section and
the expiration of any waiting period, violate any Rules applicable to Bancorp or Western or any of their
respective properties or assets.
4.9 Taxes.
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(a) Except as set forth in Schedule 4.9, (i) all material Tax Returns required to be filed by or on behalf
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of Bancorp, Western, the Bancorp Subsidiaries or the Affiliated Group(s) of which any of them is or was a member
have been duly and timely filed with the appropriate taxing authorities in all jurisdictions in which such Tax
Returns are required to be filed (after giving effect to any valid extensions of time in which to make such
filings), and all such Tax Returns were true, complete and correct in all material respects; (ii) all Taxes due
and payable by or on behalf of Bancorp, Western and the Bancorp Subsidiaries, either directly, as part of an
Affiliated Group Tax Return, or otherwise, have been fully and timely paid, except to the extent adequately
reserved therefor in accordance with generally accepted accounting principles and/or applicable regulatory
accounting principles or banking regulations consistently applied on the Bancorp, Western and Bancorp
Subsidiaries balance sheet, and adequate reserves or accruals for Taxes have been provided in the Bancorp,
Western and Bancorp Subsidiaries balance sheet with respect to any period through the date thereof for which Tax
Returns have not yet been filed or for which Taxes are not yet due and owing; and (iii) no agreement, waiver or
other document or arrangement extending or having the effect of extending the period for assessment or collection
of Taxes (including, but not limited to, any applicable statute of limitation) has been executed or filed with
any taxing authority by or on behalf of Bancorp, Western and Bancorp Subsidiaries or any of its subsidiaries, or
any Affiliated Group(s) of which any of them is or was a member.
(b) Bancorp, Western and the Bancorp Subsidiaries have each complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding of Taxes and have duly and timely
withheld from employee salaries, wages and other compensation and have paid over to the appropriate taxing
authorities all amounts required to be so withheld and paid over for all periods under all applicable laws.
(c) CBB has received complete copies of (i) all material income or franchise Tax Returns of Bancorp, Western
and the Bancorp Subsidiaries relating to the taxable periods since January 1, 1998 and (ii) any audit report
issued within the last three years relating to any material Taxes due from or with respect to Bancorp, Western
and the Bancorp Subsidiaries with respect to their respective income, assets or operations.
(d) Except as set forth in Schedule 4.9, no claim has been made by a taxing authority in a jurisdiction
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where Bancorp, Western or any of the Bancorp Subsidiaries does not file an income or franchise Tax Return such
that Bancorp, Western or any of the Bancorp Subsidiaries is or may be subject to taxation by that jurisdiction.
(e) Except as set forth in Schedule 4.9: (i) there are no deficiencies asserted or assessments made as a
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result of any examinations by any taxing authority of the Tax Returns of or covering or including Bancorp,
Western and the Bancorp Subsidiaries have been fully paid, and there are no other audits or investigations by any
taxing authority in progress, nor has Bancorp, Western or any of the Bancorp Subsidiaries received any notice
from any taxing authority that it intends to conduct such an audit or investigation; (ii) no requests for a
ruling or a determination letter are pending with any taxing authority; and (iii) no issue has been raised in
writing by any taxing authority in any current or prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed deficiency against Bancorp, Western and Bancorp
Subsidiaries for any subsequent taxable period that could be material.
(f) Except as set forth in Schedule 4.9, neither Bancorp, Western or any Bancorp Subsidiary nor any other
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Person on behalf of Bancorp, Western or any of the Bancorp Subsidiaries has (i) filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by Bancorp, Western or any
Bancorp Subsidiary (ii) agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code
or any similar provision of state, local or foreign law by reason of a change in accounting method initiated by
Bancorp, Western or any Bancorp Subsidiary or has any knowledge that the Internal Revenue Service has proposed
any such adjustment or change in accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the business or operations of Bancorp,
Western or any Bancorp Subsidiary or (iii) executed or entered into a closing agreement pursuant to Section 7121
of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law with
respect to Bancorp, Western or any of the Bancorp Subsidiaries.
(g) Except as set forth in Schedule 4.9, no property owned by Bancorp, Western or any Bancorp Subsidiary is
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(i) property required to be treated as being owned by another Person pursuant to provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986, (ii) constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of the
Code or (iii) is "tax-exempt bond financed property" within the meaning of Section 168(g) of the Code.
(h) Neither Bancorp, Western or any Bancorp Subsidiary is a party to any tax sharing agreement or similar
agreement or arrangement (whether written or not written) pursuant to which it will have any obligation to make
any payments after the Closing other than to members of the Affiliated Group of which Bancorp is the common
parent.
(i) Except as set forth in the Schedule 4.9, there is no contract, agreement, plan or arrangement covering
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any Person that, individually or collectively, could give rise to the payment of any amount that would not be
deductible by Bancorp, Western or any Bancorp Subsidiary or their respective affiliates by reason of Section 280G
of the Code, or would constitute compensation in excess of the limitation set forth in Section 162(m) of the Code.
(j) There are no liens as a result of any unpaid Taxes upon any of the assets of Bancorp, Western or the
Bancorp Subsidiaries.
(k) Except as set forth in Schedule 4.9, neither Bancorp, Western or any Bancorp Subsidiary has any
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elections in effect for federal income tax purposes under Sections 108, 168, 338, 441, 472, 1017, 1033, or 4977
of the Code.
(l) Except as set forth in Schedule 4.9, none of the members of Bancorp, Western and Bancorp Subsidiaries'
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Affiliated Group has any net operating loss carryovers.
(m) None of Bancorp, Western or any Bancorp Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the applicable period within the meaning
of Section 897(c)(1)(A)(ii) of the Code.
(n) Set forth on Schedule 4.9 is a statement as of the date hereof of the tax basis Bancorp has in Western
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and each of the Bancorp Subsidiaries.
4.10 Contracts. Except as set forth in Schedule 4.10 (all items listed or required to be listed in such
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schedule 4.10 being referred to as Scheduled Contracts), neither Western nor any of the Western Subsidiaries is a
party or otherwise subject to:
4.10.1 any employment, deferred compensation, bonus or consulting contract that (i) has a remaining term, as of
the date of this Agreement, of more than one year in length of obligation on the part of Western or any Western
Subsidiary and is not terminable by Western or any Western Subsidiary within one year without penalty or
(ii) requires payment by Western or any Western Subsidiary of $25,000 or more per annum;
4.10.2 any advertising, brokerage, licensing, dealership, representative or agency relationship or contract
requiring payment by Western or any Western Subsidiary of $25,000 or more per annum;
4.10.3 any contract or agreement that restricts Western or any Western Subsidiary (or would restrict any
Affiliate of Western or the Surviving Corporation (including CBB and its subsidiaries) after the Effective Time
of the Merger from competing in any line of business with any Person or using or employing the services of any
Person;
4.10.4 any lease of real or personal property providing for annual lease payments by or to Western or any
Western Subsidiary in excess of $25,000 per annum other than (A) financing leases entered into in the ordinary
course of business in which Western or any Western Subsidiary is lessor and (B) leases of real property presently
used by Western as banking offices;
4.10.5 any mortgage, pledge, conditional sales contract, security agreement, option, or any other similar
agreement with respect to any interest of Western or any Western Subsidiary (other than as mortgagor or pledgor
in the ordinary course of its banking business or as mortgagee, secured party or deed of trust beneficiary in the
ordinary course of its business) in personal property having a value of $25,000 or more;
4.10.6 other than as described in the Bancorp Filings or as set forth in the Bancorp Employee Plan List, any
stock purchase, stock option, stock bonus, stock ownership, profit sharing, group insurance, indemnification,
bonus, deferred compensation, severance pay, pension, retirement, savings or other incentive, welfare or
employment plan or material agreement providing benefits to any present or former employees, officers or
directors of Western or any Western Subsidiary;
4.10.7 any agreement to acquire equipment or any commitment to make capital expenditures of $25,000 or more;
4.10.8 other than agreements entered into in the ordinary course of business, including sales of other real
estate owned, any agreement for the sale of any property or assets in which Western or any Western Subsidiary has
an ownership interest or for the grant of any preferential right to purchase any such property or asset;
4.10.9 any agreement for the borrowing of any money (other than liabilities or interbank borrowings made in the
ordinary course of its banking business and reflected in the financial records of Western or any Western
Subsidiary);
4.10.10 any restrictive covenant contained in any deed to or lease of real property owned or leased by Western
or any Western Subsidiary (as lessee) that materially restricts the use, transferability or value of such
property;
4.10.11 any guarantee or indemnification which involves the sum of $25,000 or more, other than letters of credit
or loan commitments issued in the normal course of business;
4.10.12 any supply, maintenance or landscape contracts not terminable by Western or any Western Subsidiary
without penalty on 30 days' or less notice and which provides for payments in excess of $25,000 per annum;
4.10.13 any material agreement which would be terminable other than by Western or any Western Subsidiary as a
result of the consummation of the transactions contemplated by this Agreement;
4.10.14 any contract of participation with any other bank in any loan in excess of $25,000 or any sales of
assets of Western or any Western Subsidiary with recourse of any kind to Western or any Western Subsidiary except
the sale of mortgage loans, servicing rights, repurchase or reverse repurchase agreements, securities or other
financial transactions in the ordinary course of business;
4.10.15 any agreement providing for the sale or servicing of any loan or other asset which constitutes a
"recourse arrangement" under applicable regulation or policy promulgated by a Governmental Entity (except for
agreements for the sale of guaranteed portions of loans guaranteed in part by the U. S. Small Business
Administration and related servicing agreements);
4.10.16 any contract relating to the provision of data processing services to Western or any Western Subsidiary;
or
4.10.17 any other agreement of any other kind which involves future payments or receipts or performances of
services or delivery of items requiring payment of $25,000 or more to or by Western or any Western Subsidiary
other than payments made under or pursuant to loan agreements, participation agreements and other agreements for
the extension of credit in the ordinary course of their business.
True copies of all Scheduled Contracts, including all amendments and supplements thereto, have
been delivered to CBB.
4.11 Title to Property.
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(a) Schedule 4.11 sets forth a description (including the character of the ownership interest of Western and
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the Western Subsidiaries) of all real property of Western and the Western Subsidiaries, including fees,
leaseholds and all other interests in real property (including real property that is debt previously contracted
property) ("Real Property"). Except as set forth on Schedule 4.11, (i) Western and the Western Subsidiaries has
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each duly recorded, in the appropriate county, all recordable interests in Real Property, (ii) Western and the
Western Subsidiaries each has good and marketable title to all of its respective assets and properties,
including, without limitation, all personal and intangible properties reflected on the balance sheet as of
December 31, 2001 included in the Financial Statements of Bancorp, or acquired subsequent thereto, free and clear
of all Encumbrances, except (A) Encumbrances that in the aggregate do not materially detract from the value,
interfere with the use, or restrict the sale, transfer or disposition, of such properties and assets or otherwise
materially affect Western and the Western Subsidiaries; (B) any lien for taxes not yet due; (C) any Encumbrances
arising under the document that created the interest in the Real Property (other than Encumbrances arising as a
result of any breach or default by Western or any Western Subsidiary); (D) assets and properties disposed of
since December 31, 2001 in the ordinary course of business and consistent with past practice and (E) as noted in
the Financial Statements of Bancorp. Bancorp has furnished CBB with true and correct copies of all leases
included on Schedule 4.11 delivered as of the date of the Agreement, all title insurance policies relating to the
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Real Property and all documents evidencing recordation of all recordable interests in the Real Property.
(b) All tangible properties of Western and Western Subsidiaries that are material to the business, financial
condition, results of operations or prospects of Western and the Western Subsidiaries are in a good state of
maintenance and repair, except for ordinary wear and tear, and are adequate for the conduct of the business of
Western and the Western Subsidiaries as presently conducted. Except as set forth in Schedule 4.11, (i) the
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execution of this Agreement, the performance of the obligations of Bancorp and Western hereunder and the
consummation of the transactions contemplated herein, including the Stock Purchase and the Merger, do not
conflict with and will not result in a breach or default under any lease, agreement or contract described in
Schedule 4.11, or give any other party thereto a right to terminate or modify any term thereof; (ii) neither
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Western nor any Western Subsidiary has any obligation to improve any Real Property; (iii) each lease and
agreement under which Western or a Western Subsidiary is a lessor is in full force and effect and is a valid and
legally binding obligation of Western and the Western Subsidiary, as appropriate, and, to the best knowledge of
Bancorp and Western, each other party thereto; and (iv) Western and the Western Subsidiaries and, to the best
knowledge of Bancorp and Western, each other party to any such lease or agreement have performed in all material
respects all the obligations required to be performed by them to date under such lease or agreement and are not
in default in any material respect under any such lease or agreement and there is no pending or, to the best
knowledge of Bancorp or Western, any threatened proceeding, or proceeding which Bancorp or Western has reason to
believe may be threatened, with respect to such property or any such lease.
4.12 Litigation.
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(a) Schedule 4.12 sets forth a description of each legal, administrative, arbitration, investigatory or
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other proceeding (including, without limitation, any investigation, action, or proceeding with respect to Taxes)
pending or, to the best knowledge of Bancorp or Western, that has been threatened, or which Bancorp or Western
has reason to believe may be threatened, against or affecting Western or any of the Western Subsidiaries or their
respective assets or business, and has had or may have a material adverse effect on the assets, liabilities,
business, financial condition, results of operations or prospects of Western, or the Western Securities or the
transactions contemplated hereby on a consolidated basis or involves or may involve a claim or claims asserting
aggregate liability of $10,000 or more. Schedule 4.12 includes with respect to each matter identified, if
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applicable, the case title, the court, the court file number, the date filed, the law firm representing Western
or the Western Subsidiary and such other information as may be reasonably requested by CBB. Except as set forth
on Schedule 4.12, there is no (i) outstanding judgment, order, writ, injunction or decree, stipulation or award
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of any Governmental Entity or by arbitration, against, or, to the knowledge of Western, affecting Western or any
of the Western Subsidiaries or their respective assets or business that (A) has had or may have a material
adverse effect on the assets, liabilities, permits, business, financial condition, results of operations or
prospects of Western on a consolidated basis (B) requires any payment by, or excuses an obligation of a third
party to make any payment to Western or any of the Western Subsidiaries, of an amount exceeding $10,000 or
(C) has the effect of prohibiting any business practice of, or the acquisition, retention or disposition of
property by, Western or any of the Western Subsidiaries; or (ii) legal, administrative, arbitration,
investigatory or other proceeding pending or, to the best knowledge of Bancorp or Western that has been
threatened, or which Bancorp or Western has reason to believe may be threatened, against or affecting any
director, officer, employee, agent or representative of Western or any of the Western Subsidiaries, in connection
with which any such Person has or may have rights to be indemnified by Bancorp, Western or any of the Western
Subsidiaries.
(b) Except as set forth in Schedule 4.12, neither Western nor any of the Western Subsidiaries is subject to
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any cease and desist order or directive or a party to any written agreement or memorandum of understanding with
any Governmental Entity that restricts the conduct of its business, or in any manner relates to its capital
adequacy, its credit or compliance policies or its management. Copies of any such orders, agreements or
memoranda have been provided to CBB concurrently herewith.
4.13 Certain Adverse Changes. Except as specifically required, permitted or effected by this Agreement,
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since December 31, 2001 there has not been, occurred or arisen any of the following (whether or not in the
ordinary course of business unless otherwise indicated):
(a) Any change in any of the assets, liabilities, Permits, methods of accounting or accounting practice,
business, or manner of conducting business, of Western or the Western Subsidiaries or any other event or
development that has had or may reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, financial condition, results of operations or prospects of Western on a
consolidated basis;
(b) Any damage, destruction or other casualty loss (whether or not covered by insurance) that has had or may
reasonably be expected to have a material adverse effect on the business, financial condition, results of
operations or prospects of Western on a consolidated basis or that may involve a loss of more than $25,000 in
excess of applicable insurance coverage; or
(c) Any amendment, modification or termination of any existing, or entry into any new, material contract or
Permit that has had or may reasonably be expected to have, individually or in the aggregate, a material adverse
effect on the business, financial condition, results of operations or prospects of Western on a consolidated
basis;
(d) Any disposition by Western or any Western Subsidiary of an asset the lack of which has had or may
reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business,
financial condition, results of operations or prospects of Western or the Western Subsidiaries; or
(e) Any direct or indirect redemption, purchase or other acquisition by Western or any Western Subsidiary of
any equity securities or any declaration, setting aside or payment of any dividend or other distribution on or in
respect of Western Stock whether consisting of money, other personal property, real property or other things of
value.
4.14 Corporate Records. The minute books and corporate records of Western and the Western Subsidiaries
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accurately reflect all material actions duly taken by their respective shareholders, boards of directors and
committees and contain true and complete copies of their respective Charter Documents and all amendments thereto.
4.15 Accounting Records; Data Processing. Each of Western and the Western Subsidiaries has records that, in
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all material respects, fairly reflect its respective transactions, and accounting controls sufficient to ensure
that such transactions are in all material respects (a) executed in accordance with management's general or
specific authorization; and (b) recorded in conformity with generally accepted accounting principles. Such
records, to the extent they contain important information pertaining to Western and the Western Subsidiaries have
been duplicated and stored safely and securely. Schedule 4.15 sets forth each and every data processing
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agreement, lease and license, all service and maintenance agreements, and all service bureau arrangements between
Western or the Western Subsidiaries and any provider of the foregoing services, and an itemization of all data
processing equipment, related peripheral equipment and software used or intended to be used by Western or the
Western Subsidiaries in connection with data and item processing ("Western and Western Subsidiaries Data
Processing Assets"). To the best knowledge of Western and the Western Subsidiaries, except as set forth in
Schedule 4.15, the procedures and equipment, including, without limitation, the data processing equipment, data
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transmission equipment, related peripheral equipment and software, used by Western and the Western Subsidiaries
in the operation of its business (including any disaster recovery facility) to generate and retrieve such records
are adequate in relation to the size and complexity of the business of Western and the Western Subsidiaries.
4.16 Insurance. Schedule 4.16 sets forth all insurance policies and bonds maintained by Western and the
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Western Subsidiaries. Except as set forth on Schedule 4.16, (a) each of Western and the Western Subsidiaries is,
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and at all times within five years hereof has been, insured with insurers and has insurance coverage adequate to
insure against all risks normally insured against by companies in similar businesses and of comparable size;
(b) neither Western nor any Western Subsidiary is in default under any policy of insurance or bond such that it
could be cancelled and all such insurance policies and bonds maintained by Western and the Western Subsidiaries
are in full force and effect and, except for expirations in the ordinary course, will remain so through and after
the Effective Time of the Stock Purchase and the Merger; and (c) each of Western and the Western Subsidiaries has
filed claims with, or given notice of claims to, its respective insurers with respect to all material matters and
occurrences for which it believes it has coverage. Bancorp has furnished CBB with true and correct copies of all
insurance policies and bonds identified on Schedule 4.16, including all amendments and supplements thereto.
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4.17 Employee Benefit Plans and Employment and Labor Contracts.
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(a) For purposes of this Agreement, the term "Plans" shall mean (i) all "Employee Benefit Plans" (as such
term is defined in Section 3(3) of ERISA) of which Western or any of the Western Subsidiaries or any member of
the same controlled group of corporations, trades or businesses as Western and the Western Subsidiaries within
the meaning of Section 4001(a)(14) of ERISA, (for purposes of this Section, an "ERISA Affiliate") is a sponsor or
participating employer or as to which Western or any of the Western Subsidiaries or any of their ERISA Affiliates
makes contributions or is required to make contributions and (ii) any employment, severance or other agreement,
arrangement, policy or practice of Western or any of the Western Subsidiaries or of any of their ERISA Affiliates
(whether written or oral) providing for insurance coverage (including self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, or
for profit sharing, deferred compensation, bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits to employees, directors or other service
providers.
Except as is disclosed in Schedule 4.17, (i) neither Western nor any of the Western
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Subsidiaries nor any of their ERISA Affiliates maintains or sponsors, or makes or is required to make
contributions to, any of the Plans, (ii) none of the Plans is a "multiemployer plan," as defined in Section 3(37)
of ERISA, (iii) none of the Plans is a "defined benefit pension plan" within the meaning of Section 3(35) of
ERISA, (iv) none of the Plans provides healthcare or any other welfare benefits to any former employees (or any
dependents of any former employees), except as required by the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"), and (v) each of the Plans is, and at all times since its inception has been, in compliance with
all provisions of ERISA, the Code, COBRA, the Health Insurance Portability and Accountability Act of 1996
("HIPAA") and all other applicable laws. Notwithstanding any statement or indication in this Agreement to the
contrary, there are no Plans as to which Western or any of the Western Subsidiaries or any of their ERISA
Affiliates will be required to make any contributions or to make any other payments, whether on behalf of any of
the current employees of Western or any of the Western Subsidiaries or any of their ERISA Affiliates or on behalf
of any other person, after the Closing. At the Closing, there will be no unrecorded liabilities with respect to
the establishment, implementation, operation, administration or termination of any of the Plans, or the
termination of the participation in any of the Plans by Western or any of the Western Subsidiaries or any of
their ERISA Affiliates. Neither Western nor any of the Western Subsidiaries nor any ERISA Affiliates has any
formal plan or commitment, whether legally binding or not, to create any additional Plan, or to modify or change
any existing Plan that would affect any employee or terminated employee of Western or any of the Western
Subsidiaries or any of their ERISA Affiliates, except as disclosed on Schedule 4.17. Western and each of the
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Western Subsidiaries has delivered to CBB true and complete copies of: (i) each of the Plans and any related
funding and service agreements thereto (including trust and custodial agreements, insurance contracts, investment
managing agreements, subscription and participation agreements and recordkeeping contracts) including all
amendments, all of which are legally valid and binding and in full force and effect and there are no defaults
thereunder, (ii) the currently effective summary plan description, summary of material modifications and all
other material employee communications pertaining to each of the Plans, (iii) all enrollment, beneficiary
designation, loan, distribution, contribution and benefit election and other material forms used by any of the
Plans, (iv) the three most recent annual reports for each of the Plans (including all relevant schedules),
(v) the most recently filed PBGC Form 1 (if applicable), and (vi) the most recent Internal Revenue Service
determination letter for each Plan which is intended to constitute a qualified plan under Section 401 of the Code
and each amendment to each of the foregoing documents and any requests for rulings, determinations, or opinions
pending with the Internal Revenue Service or any other governmental agency.
(b) The present value of all accrued benefits and liabilities under each of the Plans that is subject to
Title IV of ERISA shall not, as of the Closing Date, exceed the then fair market value or actuarial present value
of the assets of each such Plan allocated to such accrued benefits and liabilities, based upon the applicable
provisions of the Code and ERISA. With respect to each Plan that is subject to Title IV of ERISA (i) no amount
is due or owing from Western or any of the Western Subsidiaries or any of their ERISA Affiliates to the Pension
Benefit Guaranty Corporation or to any "multiemployer plan" as defined in Section 3(37) of ERISA on account of
any withdrawal therefrom and (ii) no such Plan has been terminated at a time when the Plan was not sufficiently
funded and any such termination has been in accordance with ERISA. The transactions contemplated hereunder,
including without limitation the termination of the Plans at or prior to the Closing, shall not result in any
such withdrawal or other liability under any of the Plans or any applicable laws.
(c) None of the Plans, nor any trust created thereunder nor any trustee, fiduciary or administrator thereof,
has engaged in any transaction that might subject any of the Plans, any such trust, or any trustee, fiduciary or
administrator thereof, or any party dealing with the Plans or any such trust, to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or to any civil penalty imposed by Section 502 of ERISA. Since
the effective date of ERISA, none of the Plans subject to Title IV of ERISA has been completely or partially
terminated nor has there been any "reportable event," as such term is defined in Section 4043(b) of ERISA, with
respect to any of the Plans since the effective date of ERISA nor has any notice of intent to terminate been
filed or given with respect to any such Plan. There has been no (i) withdrawal by Western or any of the Western
Subsidiaries or any of their ERISA Affiliates that is a substantial employer from a single-employer plan which is
a Plan and which has two or more contributing sponsors at least two of whom are not under common control, as
referred to in Section 4063(b) of ERISA, or (ii) cessation by Western or any of the Western Subsidiaries or any
of their ERISA Affiliates of operations at a facility causing more than 20% of Plan participants to be separated
from employment, as referred to in Section 4062(f) of ERISA. All government reports and filings required by law
have been properly and timely filed, all information required to be distributed to participants or beneficiaries
has been distributed with respect to each of the Plans, and Western and Western Subsidiaries and its ERISA
Affiliates have performed all of their obligations under all of the Plans in all material aspects.
(d) None of the Plans nor any trust created thereunder has ever incurred any "accumulated funding
deficiency" as such term is defined in Section 412 of the Code, whether or not waived. Furthermore, neither
Western nor any of the Western Subsidiaries nor any of its ERISA Affiliates has any unfunded liability under
ERISA in respect of any of the Plans. Western or all of the Western Subsidiaries have made all contributions and
paid all amounts due and owing under all of the Plans. Each of the Plans which is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination letter that it is so qualified from
the Internal Revenue Service and Western and Western Subsidiaries do not know of any fact which could adversely
affect the qualified status of any such Plan. All amendments required to bring all of the Plans into conformity
with all of the applicable provisions of ERISA, the Code, COBRA, HIPAA and all other applicable laws have been
made. All of the Plans have been administered and maintained in compliance with ERISA, COBRA, HIPAA, the Code
and all other applicable laws. All contributions required to be made to each of the Plans under the terms of the
Plan, ERISA, the Code or any other applicable laws have been timely made. The Financial Statements of Bancorp
properly reflect all amounts required to be accrued as liabilities to date under each of the Plans. There is no
contract, agreement or benefit arrangement covering any employee of Western or any of the Western Subsidiaries
that, individually or collectively, could give rise to the payment of any amount that would constitute an "excess
parachute payment" (as defined in Section 280G of the Code) with respect to the Share Purchase and the Merger or
any other transaction.
(e) There has not occurred and there does not exists (i) any pending litigation or controversy against any
of the Plans or against Western or any of the Western Subsidiaries or any of their ERISA Affiliates as the
"Employer" or "Sponsor" under the Plans or against the trustee, fiduciaries or administrators of any of the Plans
or (ii) any pending or threatened investigation, proceeding, lawsuit, dispute, action or controversies involving
any of the Plans, the administrator or trustee of any of the Plans with any of the IRS, Department of Labor,
Pension Benefit Guaranty Corporation, any participant in the Plans, any service provider to any of the Plans or
any other person whatsoever. Without limiting the generality of the foregoing, there are no lawsuits or other
claims, pending or threatened (other than routine claims for benefits under a Plan) against (i) any Plan, or
(ii) any "Fiduciary" of such Plan (within the meaning of Section 3(21)(a) of ERISA) brought on behalf of any
participant, beneficiary or Fiduciary thereunder, nor is there a reasonable basis for any such claim.
(f) Neither Western nor any of the Western Subsidiaries nor any of their ERISA Affiliates, has used the
services of (i) workers who have been provided by a third party contract labor supplier for more than six months
or who may otherwise be eligible to participate in any of the Plans or to an extent that would reasonably be
expected to result in the disqualification or loss of preferred tax status of any of the Plans or the imposition
of penalties or excise taxes with respect to the IRS, Department of Labor, Pension Benefit Guaranty Corporation
or any other governmental entity; (ii) temporary employees who have worked for more than six months or who may
otherwise be eligible to participate in any of the Plans or to an extent that would reasonably be expected to
result in the disqualification or loss of preferred tax status of any of the Plans or the imposition of penalties
or excise taxes with respect to the IRS, Department of Labor, Pension Benefit Guaranty Corporation or any other
governmental entity; (iii) individuals who have provided services to Western or any of the Western Subsidiaries
as independent contractors for more than six months or who may otherwise be eligible to participate in any of the
Plans or to an extent that would reasonably be expected to result in the disqualification or loss of preferred
tax status of any of the Plans or the imposition of penalties or excise taxes with respect to the IRS, Department
of Labor, Pension Benefit Guaranty Corporation or any other governmental entity or (iv) leased employees, as that
term is defined in section 414(n) of the Code.
4.18 Investments. Schedule 4.18 sets forth a description of each Investment Security held by Western and the
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Western Subsidiaries on March 31, 2002. Schedule 4.18 sets forth with respect to each such Investment Security:
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(i) the issuer thereof; (ii) the outstanding balance or number of shares; (iii) the maturity, if applicable;
(iv) the title of issue; and (v) the classification under SFAS No. 115. Except as set forth on Schedule 4.18,
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neither Western nor any of the Western Subsidiaries has an Investment Security classified as trading.
4.19 Broker's or Finder's Fees. No agent, broker, investment or commercial banker, or other Person acting on
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behalf of Bancorp, Western or any Bancorp Subsidiary is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with any of the transactions
contemplated in this Agreement, including, but not limited to, the Stock Purchase and the Merger.
4.20 Compliance with Rules.
---------------------
(a) Neither Bancorp, Western nor any of the Bancorp Subsidiaries has been in default under or in breach or
violation of (i) any provision of their respective Charter Documents, or (ii) Rule, except, with respect to this
clause (ii), for such defaults, breaches or violations as would not have, individually or in the aggregate, a
material adverse effect on the business, financial condition, results of operations or prospects of Western on a
consolidated basis.
(b) Except as set forth on Schedule 4.20, (i) Western and the Western Subsidiaries are in compliance with
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all Environmental Regulations; (ii) to the best knowledge of Western and Bancorp, there are no Tanks on or about
Western or any of the Western Subsidiaries' Property; (iii) to the best knowledge of Western and Bancorp, there
are no Hazardous Materials on, below or above the surface of, or migrating to or from Western or any of the
Western Subsidiaries Property in concentrations above de minimis levels that would require remedial action; (iv)
to the best knowledge of Western and Bancorp, all outstanding Western and Western Subsidiaries' loans secured by
real property are in compliance with Environmental Regulations and no such loans have a leaking Tank or upon
which there are Hazardous Materials on or migrating to or from Western or Western Subsidiaries' Property, in
concentrations above de minimis levels that would require remedial action; and (v) without limiting Section 4.12
or the foregoing representations and warranties contained in clauses (i) through (iv), there is no written claim,
action, suit, or proceeding or notice thereof before any Governmental Entity pending against Western or any of
the Western Subsidiaries or concerning property securing Western or any of the Western Subsidiaries' loans and
there is no outstanding judgment, order, writ, injunction, decree, or award against or affecting Western, Western
Subsidiaries Property or property securing Western and Western Subsidiaries' loans. For purposes of this Section
4.20(b), the term "Environmental Regulations" shall mean all applicable statutes, regulations, rules, and
ordinances of all Governmental Entities and all applicable judicial, administrative, and regulatory decrees,
judgments, and orders relating to the protection of human health or the environment, including, without
limitation: all requirements, including, but not limited to those pertaining to reporting, licensing,
permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of
Hazardous Materials, into the air, surface water, groundwater, or land, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Materials
whether solid, liquid, or gaseous in nature and all requirements pertaining to the protection of the health and
safety of employees or the public. "Western and Western Subsidiaries Property" shall mean real estate currently
owned, or leased, or in which Western and Western Subsidiaries has an investment or security interest (by
mortgage, deed of trust, sale or lease-back), including, without limitation, properties under foreclosure and
properties held by Western and the Western Subsidiaries in capacity as a trustee. "Tank" shall mean treatment or
storage tanks, whether above ground or below ground, gas or oil xxxxx and associated piping transportation
devices. "Hazardous Materials" shall mean any substance which is defined as a hazardous waste, hazardous
substance, hazardous material, used oil, pollutant or contaminant under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601, et seq.); the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.); the Clean Air Act, as amended (42 U.S.C. Section
7401, et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. Section 1251, et seq.); the Toxic
Substances Control Act, as amended (15 U.S.C. Section 9601, et seq.); the Occupational Safety and Health Act, as
amended (29 U.S.C. Section 651; the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. Section
11001, et seq.); the Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.); and all comparable state and
local laws, including without limitation, the Xxxxxxxxx-Xxxxxxx-Xxxxxx Hazardous Substance Account Act (State
Superfund), the Xxxxxx-Cologne Water Quality Control Act, Section 25140, 25501(j) and (k), 25501.1,25281 and
25250.1 of the California Health and Safety Code and/or Article I of Title 22 of the California Code of
Regulations, Division 4, Chapter 30; laws of other jurisdictions or orders and regulations; or the presence of
which causes or threatens to cause a nuisance, trespass or other common law tort upon real property or adjacent
properties or poses or threatens to pose a hazard to the health or safety of persons or including without
limitation, gasoline, diesel fuel or other petroleum hydrocarbons; polychlorinated biphenyls (PCBs), asbestos,
urea formaldehyde foam insulation, lead, lead containing paint and lead containing paint chips.
(c) Bancorp and Western have provided to CBB phase I environmental assessments with respect to each interest
in real property set forth on Schedule 4.11 as to which such a phase I environmental investigation has been
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prepared by or on behalf of Western or any of the Western Subsidiaries. The Schedule 4.11 list shall disclose
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each such property as to which such an assessment has not been prepared on behalf of Western or any of the
Western Subsidiaries.
4.21 Performance of Obligations. Each of Western and the Western Subsidiaries has performed in all material
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respects all of the respective obligations required to be performed by them and is not in default under or in
breach of any term or provision of any covenant, contract, lease, indenture or any other covenant to which it is
a party, is subject or is otherwise bound, and no event has occurred that, with the giving of notice or the
passage of time or both, would constitute such default or breach, where such default or breach would have,
individually or in the aggregate, a material adverse effect on the business, financial condition, results of
operations or prospects of Western or the Western Subsidiaries. Except for loans and leases made by Western or
any of the Western Subsidiaries in the ordinary course of business, to Bancorp's and Western's knowledge, no
party is in breach of a material agreement with Western or any of the Western Subsidiaries which breach has had
or reasonably should be expected to have, individually or in the aggregate, a material adverse effect on the
business, financial condition, results of operations or prospects of Western or any of the Western Subsidiaries.
4.22 Employees. There are no controversies pending or threatened between either Western or any of the
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Western Subsidiaries, on the one hand, and any of their respective employees, on the other hand, that are likely
to have, individually or in the aggregate, a material adverse effect on the business, financial condition,
results of operations or prospects of Western or any of the Western Subsidiaries. Neither Western nor any of the
Western Subsidiaries is a party to any collective bargaining agreement with respect to any of its employees or
any labor organization to which its employees or any of them belong. To the best of Bancorp's and Western's
knowledge, there are no ongoing activities to organize the employees of Western or any of the Western
Subsidiaries or any threat thereof.
4.23 Certain Interests. Schedule 4.23 sets forth a description of each instance in which an officer or
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director of Western or any of the Western Subsidiaries (a) has any material interest in any property, real or
personal, tangible or intangible, used by or in connection with the business of Western and any of the Western
Subsidiaries; (b) is indebted to Western or any of the Western Subsidiaries except for normal business expense
advances; or (c) is a creditor (other than as a deposit holder) of Western or any of the Western Subsidiaries
except for amounts due under normal salary and related benefits or reimbursement of ordinary business expenses.
Except as set forth in Schedule 4.23, all such arrangements are arm's length transactions pursuant to normal
--------------
commercial terms and conditions and comply with all Rules.
4.24 Extensions of Credit. Schedule 4.24 sets forth a description (a) by type and classification, if any, of
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each loan, lease other extension of credit and commitment to extend credit by Western or any of the Western
Subsidiaries; (b) by type and classification of all loans, leases, other extensions of credit and commitments to
extend credit that have been classified by its bank examiners or auditors (external or internal) as "Watch List,"
"Substandard," "Doubtful," "Loss" or any comparable classification; and (c) all consumer loans as to which any
payment of principal, interest or other amount is 90 days or more past due.
4.25 Operating Losses. Schedule 4.25 sets forth any Operating Loss (as defined below) that has occurred at
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Western or any of the Western Subsidiaries during the period after December 31, 2001 to the date of this
Agreement. Except as set forth on Schedule 4.25, to the best knowledge of Bancorp and Western, no event has
--------------
occurred, and no action has been taken or omitted to be taken by any employee of Western or any of the Western
Subsidiaries that has resulted in the incurrence by Western or any of the Western Subsidiaries of an Operating
Loss or that might reasonably be expected to result in the incurrence by Western or any of the Western
Subsidiaries of an Operating Loss after the date hereof, which, net of any insurance proceeds payable in respect
thereof, exceeds, or would exceed $5,000 by itself or $10,000 when aggregated with all other Operating Losses
during such period. For purposes of this Agreement, "Operating Loss" means any individual loss in excess of $500
resulting from cash shortages, lost or misposted items, disputed clerical and accounting errors, forged checks,
payment of checks over stop payment orders, counterfeit money, wire transfers made in error, theft, robberies,
defalcations, check kiting, fraudulent use of credit cards or electronic teller machines, civil money penalties,
fines, litigation, claims, arbitration awards or other similar acts or occurrences.
4.26 Powers of Attorney. Except as set forth on Schedule 4.26, neither Western nor any of the Western
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Subsidiaries has granted any Person a power of attorney or similar authorization that is presently in effect or
outstanding.
4.27 Offices and ATMs. Schedule 4.27 sets forth the headquarters of Western and the Western Subsidiaries
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(identified as such) and each of the offices and automated teller machines ("ATMs") maintained and operated by
Western and the Western Subsidiaries (including, without limitation, representatives and loan production offices
and operations centers) and the location thereof. Except as set forth on Schedule 4.27, neither Western nor any
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of the Western Subsidiaries maintains any other office or ATM and conducts business at any other location.
Neither Western nor any of the Western Subsidiaries has applied for or received permission to open any additional
branch or operate at any other location.
4.28 Facts Affecting Regulatory Approvals. To the best knowledge of Bancorp and Western, there is no fact,
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event or condition applicable to Western or any of the Western Subsidiaries which will, or reasonably could be
expected to, adversely affect the likelihood of securing the requisite approvals or Consents of any Governmental
Entity to the Stock Purchase, the Merger or any of the transactions contemplated by this Agreement.
4.29 Accounting and Tax Matters. Each of Western and the Western Subsidiaries has through the date hereof
----------------------------
not taken or agreed to take any action that would prevent the Stock Purchase from qualifying as a qualified stock
purchase under the Code, or the Merger from qualifying as a tax-free liquidation under the Code.
4.30 Indemnification. Other than pursuant to the provisions of their respective Charter Documents, neither
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Western nor any of the Western Subsidiaries is a party to any indemnification agreement with any of their
respective present or former officers, directors, employees, agents or other persons who serve or served in any
other capacity with any other enterprise at the request of Western or the Western Subsidiaries (a "Covered
Person"), and to the best knowledge of Bancorp and Western, there are no claims for which any Covered Person would
be entitled to indemnification by Western or any of the Western Subsidiaries if such provisions were deemed in
effect, except as set forth in Schedule 4.30.
-------------
4.31 Community Reinvestment Act. Western has received a rating of "Satisfactory" in its most recent CRA
----------------------------
examination. Western has not been advised of any supervisory concerns regarding its compliance with the CRA.
To the best knowledge of Bancorp and Western, Western's compliance under the CRA should not constitute grounds
for either the denial by any Governmental Entity of any application to consummate the transactions contemplated
by this Agreement or the imposition of a materially burdensome condition in connection with the approval of any
such application.
4.32 Bank Secrecy Act. Western has not been advised of any supervisory concerns regarding its compliance
----------------
with the Bank Secrecy Act (31 U.S.C.ss.5322, et seq.) or related state or federal anti-money laundering laws,
regulations and guidelines, including (i) those provisions of the United States Code providing penalties for the
laundering of monetary instruments (18 U.S.C.ss.1956) or engaging in monetary transactions in property derived
from specified unlawful activity (18 U.S.C.ss.1957) and (ii) any "Know Your Customer" regulations, guidelines or
supervisory policies and examination requirements.
4.33 Derivative Transactions. Except as set forth in Schedule 4.33, neither Western nor any of the Western
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Subsidiaries is a party to or has agreed to enter into an exchange traded or over-the-counter equity, interest
rate, foreign exchange or other swap, forward, future, option, cap, floor or collar or any other contract that is
not included on the balance sheet and is a derivative contract (including various combinations thereof) or owns
securities that are referred to generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes," or "capped floating rate mortgage derivatives."
4.34 Trust Administration. Neither Western nor any of the Western Subsidiaries exercises trust powers,
---------------------
including, but not limited to, trust administration, and neither they nor any predecessor has exercised such
trust powers for a period of at least three years prior to the date hereof. The term "trusts" as used in this
Section 4.34 includes (i) any and all common law or other trusts between an individual, corporation or other
entities and Western or any of the Western Subsidiaries or a predecessor, as trustee or co-trustee, including,
without limitation, pension or other qualified or nonqualified employee benefit plans, compensation,
testamentary, inter vivos, and charitable trust indentures; (ii) any and all decedents' estates where Western and
Western Subsidiaries or a predecessor is serving or has served as a co-executor or sole executor, personal
representative or administrator, administrator xx xxxxx non, administrator xx xxxxx non with will annexed, or in
any similar fiduciary capacity; (iii) any and all guardianships, conservatorships or similar positions where
Western or any of the Western Subsidiaries or a predecessor is serving or has served as a co-grantor or a sole
grantor or a conservator or co-conservator of the estate, or any similar fiduciary capacity; and (iv) any and all
agency and/or custodial accounts and/or similar arrangements, including plan administrator for employee benefit
accounts, under which Western or any of the Western Subsidiaries or a predecessor is serving or has served as an
agent or custodian for the owner or other party establishing the account with or without investment authority.
4.35 Intellectual Property. Except as set forth Schedule 4.35, each of Western and the Western Subsidiaries
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owns or possesses valid and binding licenses and other rights to use without payment all material patents,
copyrights, trade secrets, trade names, service marks and trademarks used in its businesses; and neither Western
nor any of the Western Subsidiaries has received any notice with respect thereto that asserts the rights of
others. Each of Western and the Western Subsidiaries has in all material respects performed all the obligations
required to be performed by it, and is not in default in any material respect under any license, contract,
agreement, arrangement or commitment relating to any of the foregoing.
4.36 Disclosure Documents and Applications. None of the information supplied or to be supplied by or on
----------------------------------------
behalf of Bancorp, Western and the Bancorp Subsidiaries ("Bancorp Supplied Information") for inclusion in (a) the
proxy statement or other materials and documents ("Proxy Statement") to be mailed to the shareholders of Bancorp
in connection with obtaining the approval of the shareholders of Western and Western Subsidiaries of this
Agreement, the Stock Purchase and the other transactions contemplated hereby, and (b) any other documents to be
filed with the FRB, the Comptroller, the FDIC, the Commissioner or any other Governmental Entity in connection
with the transactions contemplated in this Agreement will, at the respective times such documents are filed or
become effective, or with respect to the Proxy Statement, when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.
4.37 Licenses and Permits. Each of Western and the Western Subsidiaries has all material licenses and
----------------------
Permits that are necessary for the conduct of its respective business, and such licenses and Permits are in full
force and effect, except for any failure to be in full force and effect that would not, individually or in the
aggregate, have a material adverse effect on the business, financial condition, results of operations or
prospects of Western on a consolidated basis. The respective properties, assets, operations, and business of
each of Western and the Western Subsidiaries have been maintained and conducted in all material respects, in
compliance with all applicable laws and regulations.
4.38 Insider Loans, Other Transactions. Bancorp and Western have set forth on Schedule 4.38 with a listing,
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current as of the date hereof, of all extensions of credit made by Western and each of the Western Subsidiaries
to each of its respective executive officers and directors and their related interests (all as defined under
Federal Reserve Board Regulation O), all of which have been made in compliance with Regulation O, and Section 23B
under the Federal Reserve Act which listing is true, correct and complete in all material respects. Neither
Western nor any of the Western Subsidiaries owes any amount to, or has any contract or lease with or commitment
to, any of the present executive officers or directors of Western or Western Subsidiaries (other than for
compensation for current serving not yet done and payable, reimbursement of expenses arising in the ordinary
course of business, options or awards available under the Bancorp Stock Option Plan or any amount due pursuant to
any Employee Plans.)
4.39 SBA Lending. Western is a certified preferred lender with respect to the Small Business Administration
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and maintains a program for lending with the Small Business Administration.
4.40 Accuracy and Currentness of Information Furnished. The representations and warranties made by Bancorp
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and Western hereby or in the lists or schedules hereto contain no statements of material fact which are untrue or
misleading, or omit to state any material fact which is necessary under the circumstances to prevent the
statements contained herein or in such lists or schedules from being misleading. Bancorp and Western hereby
covenant that they shall, not later than the 15th day of each calendar month between the date hereof and the
Closing Date, amend or supplement the schedules prepared and delivered pursuant to this Article 4 to ensure that
the information set forth in such schedules accurately reflects the then-current status of Bancorp and Western.
Bancorp and Western shall further amend or supplement the schedules as of the Closing Date if necessary to
reflect any additional changes in the status of Bancorp or Western.
4.41 Effective Date of Representations and Warranties. Each representation and warranty of Bancorp and
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Western set forth in this Agreement shall be deemed to be made on and as of the date hereof and as of the
Effective Time of the Stock Purchase.
Article 5.
REPRESENTATIONS AND WARRANTIES OF CBB
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CBB represents and warrants to Bancorp and Western as follows:
5.1 Incorporation, Standing and Power. CBB is a California state chartered bank duly organized, validly
----------------------------------
existing and in good standing under the laws of the State of California and is authorized by the DFI to conduct a
general banking business. CBB's deposits are insured by the FDIC in the manner and to the fullest extent
provided by law. CBB has all requisite corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted.
5.2 Financial Statements. CBB has previously furnished to Bancorp a copy of the Financial Statements of
---------------------
CBB. The Financial Statements of CBB: (a) present fairly the consolidated financial condition of CBB as of the
respective dates indicated and its consolidated results of operations and statements of cash flows, as
applicable, for the respective periods then ended, subject, in the case of the unaudited consolidated interim
financial statements, to normal recurring adjustments; (b) have been prepared in accordance with generally
accepted accounting principles and/or applicable regulatory accounting principles or banking regulations
consistently applied (except as otherwise indicated therein); and (c) are based upon the books and records of CBB
and its subsidiaries.
5.3 Authority. The execution and delivery by CBB of this Agreement has been duly and validly authorized by
---------
all necessary corporate action on the part of CBB. This Agreement is a valid and binding obligation of CBB,
enforceable in accordance with its respective terms, except as the enforceability thereof may be limited by
bankruptcy, liquidation, receivership, conservatorship, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general equitable principles.
5.4 No Conflicts; Defaults. The execution, delivery and performance of this Agreement, the consummation of
-----------------------
the transactions contemplated herein and compliance by CBB with any provision hereof will not (a) conflict with
its Charter Documents; (b) except for the prior approval of the FRB, the Comptroller, the FDIC and the
Commissioner, require any Consents of CBB; or (c) subject to obtaining the Consents referred to in subsection (b)
of this Section 5.4 and the expiration of any required waiting period, violate any Rules to which CBB is subject.
5.5 Accuracy of Information Furnished. None of the information supplied or to be supplied by or on behalf
-----------------------------------
of CBB ("CBB Supplied Information") for inclusion in (a) the Proxy Statement, and (b) any other documents to be
filed with the FRB, the Comptroller, the FDIC, the Commissioner or any other Governmental Entity in connection
with the transactions contemplated in this Agreement will, at the respective times such documents are filed or
become effective, or with respect to the Proxy Statement when mailed, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.
5.6 CRA Standing. To the best knowledge of CBB, CBB's compliance under the CRA should not constitute
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grounds for either the denial by any Governmental Entity of any application to consummate the transactions
contemplated by this Agreement or the imposition of a materially burdensome condition in connection with the
approval of any such application.
5.7 Regulatory Approvals. To the best knowledge of CBB, CBB has no reason to believe that it would not
---------------------
receive all required approvals from any Governmental Entity of any application to consummate the transactions
contemplated by this Agreement without the imposition of a materially burdensome condition in connection with the
approval of any such application.
5.8 Accuracy and Correctness of Information Furnished. The representations and warranties made by CBB
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hereby contain no statements of fact which are untrue and misleading, or omit to state any intended fact which is
necessary under the circumstances to prevent the statement contained herein from being misleading.
5.9 Effective Date of Representations and Warranties. Each representation and warranty of CBB set forth in
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this Agreement shall be deemed to be made on and as of the date hereof and as of the Effective Time of the Stock
Purchase.
Article 6.
COVENANTS OF BANCORP AND WESTERN PENDING
-----------------------------------------
EFFECTIVE TIME OF THE SHARE PURCHASE
------------------------------------
Bancorp and Western covenant and agree with CBB as follows:
6.1 Limitation on Conduct Prior to Effective Time of the Share Purchase. Between the date hereof and the
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Effective Time of the Stock Purchase, except as contemplated by this Agreement and subject to requirements of law
and regulation, Bancorp and Western agree to conduct their respective businesses (and to cause each of the
Western Subsidiaries to conduct their respective businesses) in the ordinary course in substantially the manner
heretofore conducted and in accordance with sound business and banking practices, and Bancorp and Western shall
not (and shall cause each of the Western Subsidiaries to not), without the prior written consent of CBB, which
consent shall not be unreasonably withheld:
6.1.1 issue, sell or grant any Western Stock any other securities (including long-term debt) of Western or any
of the Western Subsidiaries, or any rights, stock appreciation rights, options or securities to acquire any
Western Stock, or any other securities (including long-term debt) of Western or any of the Western Subsidiaries
take any action to or impose any Encumbrance on Western Stock or other securities of Western or any Western
Subsidiary;
6.1.2 declare, set aside or pay any dividend or make any other distribution upon or split, combine or
reclassify any shares of capital stock or other securities of Bancorp, Western or any Bancorp Subsidiary;
provided however, immediately prior to the Closing, Western may pay the Western Dividend;
6.1.3 except as required pursuant to Section 2.7, purchase, redeem or otherwise acquire any capital stock or
other securities of Western or any Western Subsidiary or any rights, options, or securities to acquire any
capital stock or other securities of Western or any Western Subsidiary;
6.1.4 except as may be required to effect the transactions contemplated herein, amend their respective Charter
Documents;
6.1.5 grant any general or uniform increase in the rate of pay of employees or employee benefits, except in
the ordinary course of business consistent with past practice;
6.1.6 grant any increase in salary, incentive compensation or employee benefits or pay any bonus to any Person
except in the ordinary course of business consistent with past practice, and pursuant to any written contractual
obligations as of the date hereof, or voluntarily accelerate the vesting of any employee benefits, and except as
provided in Article 12 of this Agreement;
6.1.7 make any capital expenditure or commitments with respect thereto in excess of $25,000 in the aggregate,
except for ordinary repairs, renewals and replacements;
6.1.8 compromise or otherwise settle or adjust any assertion or claim of a deficiency in taxes (or interest
thereon or penalties in connection therewith), extend the statute of limitations with any tax authority or file
any pleading in court in any tax litigation or any appeal from an asserted deficiency, or file or amend any
federal, foreign, state or local tax return, or make any tax election;
6.1.9 grant, renew or commit to grant or renew any extension of credit, or purchase or commit to purchase any
participation in any extension of credit, if such extension of credit, together with all other credit then
outstanding to the same Person and all Affiliated Persons, would exceed the greater of $100,000 (consent shall be
deemed granted if within three business days of written notice delivered to CBB's Chief Lending Officer, notice
of objection is not received by Bancorp);
6.1.10 change its tax or accounting policies and procedures or any method or period of accounting unless
required by generally accepted accounting principles or a Governmental Entity;
6.1.11 grant or commit to grant any extension of credit or amend the terms of any such credit outstanding on
the date hereof to any executive officer, director or holder of 10% or more of the outstanding Bancorp Stock, or
any Affiliate of such Person, if such credit would exceed $100,000 (consent shall be deemed granted if within
three business days of written notice delivered to CBB's Chief Lending Officer, notice of objection is not
received by Bancorp);
6.1.12 close any offices at which business is conducted or open any new offices;
6.1.13 adopt or enter into any new employment agreement or other employee benefit plan or arrangement or amend
or modify any employment agreement or employee benefit plan or arrangement of any such type except for such
amendments as are required by law;
6.1.14 initiate, solicit or encourage (including by way of furnishing information or assistance), or take any
other action intended to facilitate, any inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as such term is defined below), or negotiate with
any person in furtherance of such inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of Bancorp's or Western's officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or any other representative retained by either of
them or any of its Affiliates to take any such action, and Bancorp shall promptly notify CBB (orally and in
writing) of all of the relevant details relating to all inquiries and proposals which it may receive relating to
any of such matters. For purposes of this Agreement, "Competing Transaction" shall mean any of the following
involving Bancorp or Western: any merger, consolidation, share exchange or other business combination; a sale,
lease, exchange, mortgage, pledge, transfer or other disposition of assets of Bancorp or Western representing 10%
or more of the consolidated assets of Bancorp or Western; a sale of shares of capital stock (or securities
convertible or exchangeable into or otherwise evidencing, or any agreement or instrument evidencing, the right to
acquire capital stock), representing 10% or more of the voting power of Bancorp or Western; a tender offer or
exchange offer for at least 10% of the outstanding shares or Bancorp; a solicitation of proxies in opposition to
approval of the Merger by Bancorp's shareholders; or a public announcement of an unsolicited bona fide proposal,
plan, or intention to do any of the foregoing. Bancorp and Western will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any party (other than CBB) conducted
heretofore with respect to the foregoing. Bancorp agrees that it shall notify CBB immediately if any such
inquiries, proposals or offers are received by, any such information is requested from, or any such negotiations
or discussions are sought to be initiated or continued with Bancorp and Western. Bancorp also agrees that is
shall promptly request each other person, other than CBB, that has heretofore executed a confidentiality
agreement in connection with its consideration of acquiring Bancorp or Western, to return all confidential
information heretofore furnished to such person by or on behalf of Bancorp or Western and enforce any such
confidentiality agreements. Notwithstanding any other provision in this Section 6.1.14 or elsewhere in this
Agreement, nothing herein shall prevent Bancorp or Western from (i) engaging in any discussions or negotiations
with, or providing any information to, any Person in response to an unsolicited bona fide written proposal
concerning a Competing Transaction by any such Person or (ii) recommending such an unsolicited bona fide written
proposal concerning a Competing Transaction to the holders of Bancorp Stock if, and only if, prior to
participating in any of the foregoing, (A) the Board of Directors of Bancorp and Western concludes in good faith
that the Competing Transaction, if consummated, would result in a transaction more favorable to the holders of
Bancorp Stock than the transaction contemplated by this Agreement (any such more favorable transaction being
referred to herein as a "Superior Proposal"); (B) the Board of Directors of Bancorp and Western determine in good
faith based upon the advice of outside counsel that participating in any such action is necessary to act in a
manner not inconsistent with their fiduciary duties under applicable law; and (C) at least forty-eight hours
prior to providing any information or data to any Person or entering into discussions or negotiations with any
Person, the Board of Directors of Bancorp and Western notifies CBB of such inquiries, proposals or offers
received by, any such information requested from, or any such discussions or negotiations sought to be initiated
or continued with Bancorp or Western.
6.1.15 make any material change in any basic policies and practices with respect to pricing of loans, deposits
and services, liquidity management and cash flow planning, marketing, deposit origination, lending, budgeting,
profit and tax planning, personnel practices or any other material aspect of Western's or any of the Western
Subsidiaries' business or operations;
6.1.16 grant any Person a power of attorney or similar authority;
6.1.17 make any investment by purchase of stock or securities (including an Investment Security), contributions
to capital, property transfers or otherwise in any other Person, except for federal funds or obligations of the
United States Treasury or an agency of the United States Government the obligations of which are entitled to or
implied to have the full faith and credit of the United States government and which have an original maturity not
in excess of one year, or bank qualified investment grade municipal bonds, in any case, in the ordinary course of
business consistent with past practices and which are not designated as trading;
6.1.18 amend or modify any Scheduled Contract or enter into any agreement or contract that would be a Scheduled
Contract under Section 4.10;
6.1.19 sell, transfer, mortgage, encumber or otherwise dispose of any assets or release or waive any claim,
except in the ordinary course of business and consistent with past practices, provided, however, Western shall be
------------------
permitted to encumber the real property owned by WSPI on terms and conditions reasonably satisfactory to CBB in
order to consummate the transactions contemplated by this Agreement, provided further Western shall be able to
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sell the assets of WSCDC pursuant to the WSCDC Asset Sale Agreement, and provided further, Western may transfer
-----------------
any Western owned automobiles to its employees or directors, so long as Western accrues, as of the date of such
transfer(s), for the book value of such automobile(s) as a Transaction Cost prior to the Closing Date;
6.1.20 take any action which would or is reasonably likely to (i) adversely affect the ability of CBB, Bancorp
or Western to obtain any necessary approval of any Governmental Entity required for the transactions contemplated
hereby; (ii) adversely affect Bancorp's or Western's or any of the Western Subsidiaries' ability to perform their
respective covenants and agreements under this Agreement; or (iii) result in any of the conditions to the
performance of CBB's or Bancorp's and Western's obligations hereunder, as set forth in Articles 9 or 10 herein
not being satisfied;
6.1.21 make any special or extraordinary payments to any Person in an aggregate amount to that Person;
6.1.22 reclassify any Investment Security from hold-to-maturity or available for sale to trading;
6.1.23 sell any security other than in the ordinary course of business, or engage in gains trading;
6.1.24 take title to any real property without conducting prior thereto an environmental investigation, which
investigation shall disclose the absence of any suspected environmental contamination;
6.1.25 take or cause to be taken any action which would disqualify either the Stock Purchase or the Merger as a
qualified stock purchase within the meaning of Section 338 of the Code or the Merger as a tax-free subsidiary
liquidation within the meaning of Section 332 of the Code;
6.1.26 settle any claim, action or proceeding involving any material liability for monetary damages or enter
into any settlement agreement containing material obligations;
6.1.27 make, acquire a participation in, or reacquire an interest in a participation sold of, any loan that is
not in compliance with its normal credit underwriting standards, policies and procedures as in effect on December
31, 2001; or renew, extend the maturity of, or alter any of the material terms of any such loan for a period of
greater than six months;
6.1.28 incur any indebtedness for borrowed money or assume, guaranty, endorse or otherwise as an accommodation
become responsible for the obligations of any other person, except for (i) in connection with banking
transactions with banking customers in the ordinary course of business, or (ii) short-term borrowings made at
prevailing market rates and terms; or
6.1.29 agree or make any commitment to take any actions prohibited by this Section 6.1.
6.2 Affirmative Conduct Prior to Effective Time of the Merger. Between the date hereof and the Effective
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Time of the Stock Purchase, Bancorp and Western shall (and shall cause each of the Western Subsidiaries to):
6.2.1 use their commercially reasonable efforts consistent with this Agreement to maintain and preserve intact
its present business organization and to maintain and preserve its relationships and goodwill with account
holders, borrowers, employees and others having business relationships with Western and each of the Western
Subsidiaries;
6.2.2 use their commercially reasonable efforts to keep in full force and effect all of the existing material
permits and licenses of Western and each of the Western Subsidiaries;
6.2.3 use their commercially reasonable efforts to maintain insurance coverage at least equal to that now in
effect on all properties for which it is responsible and on its business operations;
6.2.4 perform their contractual obligations and not become in default on any such obligations;
6.2.5 duly observe and conform in all respects to all lawful requirements applicable to their business;
6.2.6 maintain their assets and properties in good condition and repair, normal wear and tear excepted;
6.2.7 promptly upon learning of such information, advise CBB in writing of any event or any other transaction
within its knowledge whereby any Person or Related Group of Persons acquires, directly or indirectly, record or
beneficial ownership or control (as defined in Rule 13d-3 promulgated by the SEC under the Exchange Act) of 5% or
more of the outstanding Bancorp Stock prior to the record date fixed for the Bancorp Shareholders' Meeting or any
adjourned meeting thereof to approve this Agreement and the transactions contemplated herein;
6.2.8 promptly notify CBB regarding receipt from any tax authority of any notification of the commencement of
an audit, any request to extend the statute of limitations, any statutory notice of deficiency, any revenue
agent's report, any notice of proposed assessment, or any other similar notification of potential adjustments to
the tax liabilities of Bancorp, Western or any of the Bancorp Subsidiaries on a consolidated basis, or any actual
or threatened collection enforcement activity by any tax authority with respect to tax liabilities of Bancorp,
Western or any of the Bancorp Subsidiaries on a consolidated basis;
6.2.9 make available to CBB monthly unaudited balance sheets and income statements of Western within 25 days
after the close of each calendar month;
6.2.10 use commercially reasonable efforts to obtain the Consent of any third-party with respect to any
contract, agreement, lease, license, arrangement, permit or release that is material to the business of Western
or any of the Western Subsidiaries or that is contemplated in this Agreement as required in connection with the
Stock Purchase or the Merger;
6.2.11 maintain an allowance for loan and lease losses consistent with practices and methodology as in effect
on the date of the execution of this Agreement;
6.2.12 use their respective commercially reasonable efforts to take all actions or cause to be done, all things
necessary, proper or advisable under applicable Rules to consummate the transactions contemplated by this
Agreement as promptly as practicable including cooperation in the preparation of all applications identified in
Section 7.2.
6.2.13 not later than the 10th day of each calendar month, amend or supplement the Western Schedules prepared
and delivered pursuant to Article 4 to ensure that the information set forth in the Bancorp Schedules accurately
reflects the then-current status of Western and the Western subsidiaries. Bancorp and Western shall further
amend or supplement the Bancorp Schedules as of the Closing Date if necessary to reflect any additional
information that needs to be included in the Bancorp Schedules.
6.3 Access to Information.
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6.3.1 Bancorp and Western will afford, upon reasonable request, to CBB and its representatives, counsel,
accountants, agents and employees (collectively, the "Representatives") access during normal business hours to
all of their business, operations, properties, books, files and records and will do everything reasonably
necessary to enable CBB and its Representatives, counsel, accountants, agents and employees to make a complete
examination of the financial statements, business, assets and properties of Western and each of the Western
Subsidiaries and the condition thereof and to update such examination at such intervals as CBB shall deem
appropriate. Without limiting the foregoing, CBB and its Representatives shall have the right (i) to review all
of Western's and the Western Subsidiaries' properties, books, records, loans and leases, operating reports, audit
reports, operation instructions and procedures, tax returns, tax settlement letters, contracts and documents, and
all other information with respect to their respective business affairs, financial condition, assets and
liabilities, (ii) to make copies of such books, records and other documents and (iii) to discuss its business
affairs, condition (financial and otherwise), assets and liabilities with Western's and each of the Western
Subsidiaries' directors, officers, accountants and counsel, as CBB considers necessary or appropriate for the
purposes of familiarizing itself with the business and operations of Western, conducting an evaluation of the
assets and liabilities of Bancorp and Western, determining whether to close the transactions contemplated by this
Agreement, determining the accuracy of the representations and warranties set forth in Article 4, obtaining any
necessary orders, consents or approvals of the transactions contemplated by this Agreement by any Governmental
Entity. Any such review shall be conducted in cooperation with the officers of Bancorp and Western and in such a
manner to minimize any disruption of, or interference with, the normal business operations of Western. In
addition, Bancorp and Western will cause H&B to make available to CBB and its Representatives such personnel,
work papers and other documentation of H&B, relating to its work papers and its audits and examinations of the
books and records of Western and each of the Western Subsidiaries, or the tax returns of Western as may be
requested by CBB in connection with its review of the foregoing matters.
6.3.2 A representative of CBB, selected by CBB in its sole discretion, shall be authorized and permitted to
review each loan, lease, or other credit funded or renewed by Western or any Western Subsidiary after the date
hereof, and all information associated with such loan, lease or other credit within three Business Days of such
funding or renewal, such review to take place, if possible, on Western's premises.
6.3.3 A representative of CBB, selected by CBB in its sole discretion, shall be permitted by Western to attend
all regular and special Board of Directors' and committee meetings of Western and each of the Western
Subsidiaries from the date hereof until the Effective Time of the Stock Purchase; provided, however, that the
attendance of such representative shall not be permitted at any meeting, or portion thereof, for the purpose of
discussing the transactions contemplated or affected by this Agreement or the obligations of Bancorp and Western
under this Agreement.
6.4 Filings. Bancorp and Western agree that through the Effective Time of the Stock Purchase, each of
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Western's and the Western Subsidiaries' reports, registrations, statements and other filings required to be filed
with any applicable Governmental Entity will comply in all material respects with all the applicable statutes,
rules and regulations enforced or promulgated by the Governmental Entity with which it will be filed and none
will contain any untrue statement of material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under which they were made, not
misleading. Any financial statement contained in any such report, registration, statement or other filing that
is intended to present the financial position of the entity to which it relates will fairly present the financial
position of such entity and will be prepared in accordance with generally accepted accounting principles or
applicable banking regulations consistently applied during the periods involved, except where any misstatement or
omission would not make the statements therein, in light of the circumstances under which they were made,
misleading.
6.5 Notices; Reports. Bancorp and Western will promptly notify CBB of any event of which either of them
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obtains knowledge which has had or may reasonably be expected to have a material adverse effect on the business,
financial condition, results of operations, or prospects of Western or any of the Western Subsidiaries, or in the
event that Bancorp or Western determines that it is unable to fulfill any of the conditions to the performance of
CBB's obligations hereunder, as set forth in Articles 10 or 12 herein. Bancorp and Western will promptly notify
CBB of any notice by any Governmental Entity of the initiation of any enforcement action or civil money penalty
against Western or any Western Subsidiary or any adverse change in the CRA rating of Western that materially and
adversely affects the ability of Bancorp or Western to consummate the transactions contemplated herein. Bancorp
will furnish CBB (i) as soon as available, and in any event within one Business Day after it is mailed or
delivered to the Board of Directors of Western or the Western Subsidiaries or committees thereof, any report by
Bancorp or Western for submission to the Board of Directors of Bancorp, Western or the Bancorp Subsidiaries or
committees thereof, provided, however, that Bancorp need not furnish to CBB communications of Bancorp's legal
counsel regarding Bancorp's rights and obligations under this Agreement or the transactions contemplated hereby,
or books, records and documents covered by confidentiality agreements or the attorney-client privilege, or which
are attorneys' work product, (ii) as soon as available, all proxy statements, information statements, financial
statements, reports, letters and communications sent by Bancorp to its shareholders or other security holders,
and all reports filed by Western or any of the Western Subsidiaries with the FRB, the FDIC, the OCC, the DFI or
any Governmental Entity, and (iii) such other existing reports as CBB may reasonably request relating to Bancorp,
Western or the Bancorp Subsidiaries. Each of the financial statements delivered pursuant to subsection (ii) of
this Section 6.5 shall (i) be prepared in accordance with generally accepted accounting principles on a basis
consistent with that of the audited Financial Statements of Bancorp; (ii) set forth adequate reserves for loan
losses and other contingencies; and (iii) be accompanied by a certificate of the Chief Financial Officer of
Bancorp to the effect that such financial statements fairly present the financial condition and results of
operations of Bancorp for the periods covered, and reflect all adjustments (which consist only of normal
recurring adjustments) necessary for a fair presentation thereof. Bancorp and Western agree that through the
Effective Time of the Stock Purchase, each of its respective filings and the filings of each of the
Subsidiaries; (i) will comply in all material respects with all of the Rules enforced or promulgated by the
Governmental Entity with which it will be filed; and (ii) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading. Any financial statement contained in
any of such filings that is intended to present the financial position of the entity to which it relates will
fairly present the financial position of such entity and will be prepared in accordance with generally accepted
accounting principles or banking regulations consistently applied during the period involved.
6.6 Bancorp Shareholders' Meeting. Promptly after the execution of this Agreement, Bancorp will take action
------------------------------
necessary in accordance with applicable law and its Articles of Incorporation and Bylaws to convene a meeting of
its shareholders to consider and vote upon this Agreement and the transactions contemplated hereby so as to
permit the consummation of the transactions contemplated hereby. The Board of Directors of Bancorp shall,
subject to its fiduciary duties, recommend that its shareholders approve this Agreement and the transactions
contemplated hereby, and the Board of Directors of Bancorp shall, subject to its fiduciary duties, use its best
efforts to obtain the affirmative vote of the holders of the largest possible percentage of the outstanding
Bancorp Stock to approve this Agreement and the transactions contemplated hereby.
6.7 Certain Loans and Other Extensions of Credit. Bancorp will promptly inform CBB of the amounts and
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categories of any loans, leases or other extensions of credit that have been classified by any Governmental
Entity or by any unit of Western or any of the Western Subsidiaries or by any other Person as "Criticized,"
"Specially Mentioned," "Substandard," "Doubtful," "Loss" or any comparable classification ("Classified Credits").
Bancorp will furnish CBB, as soon as practicable, and in any event within 5 Business Days after the end of each
calendar month, schedules including the following:
(a) classified credits, showing with respect to each such credit the classification category, credit type
and office;
(b) nonaccrual credits, showing with respect to each such credit the credit type and office;
(c) accrual exception credits that are delinquent 90 or more days and have not been placed on nonaccrual
status, showing with respect to each such credit the credit type and office;
(d) delinquent credits, showing with respect to each such credit the credit type, office and an aging
schedule broken down into 30-59, 60-89, 90-119 and 120+ day categories;
(e) loan and lease participations, stating, with respect to each, whether it was purchased or sold, and the
loan or lease type;
(f) loans or leases (including any commitments) by Bancorp, Western or any Bancorp Subsidiary to any
director, officer, or employee of Bancorp, Western or any Bancorp Subsidiary, or any shareholder holding 5% or
more of the Bancorp Stock, including with respect to each such loan or lease, the identity and, to the best
knowledge of Bancorp and Western, the relation of the borrower to one of the foregoing entities, the loan or
lease type and the outstanding and undrawn amounts;
(g) letters of credit, showing with respect to each letter of credit the credit type and office;
(h) loans or leases charged off during the previous month, showing with respect to each such loan or lease,
the credit type and office;
(i) loans or leases written down during the previous month, including with respect to each such loan or
lease, the credit type and office;
(j) other real estate or assets owned, stating with respect to each its credit type;
(k) a reconciliation of the allowance for loan and lease losses, identifying specifically the amount and
sources of all additions and reductions to the allowance (which may be by reference to specific portions of
another schedule furnished pursuant to this Section 6.7 and, in the case of unallocated adjustments, shall
disclose the methodology and calculations through which the amount of such adjustment was determined);
(l) extensions of credit originated on or after the date of the schedule previously provided to CBB (or, if
it is the first such schedule, the date of this Agreement) and before the date of the schedule in which reported,
showing with respect to each, the credit type and the office; and
(m) renewals or extensions of maturity of outstanding extensions of credit, showing with respect to each,
the credit type and the office.
6.8 Applications. Subject to Section 7.2, Bancorp will promptly prepare or cause to be prepared the Proxy
------------
Statement and any other applications CBB deems necessary to consummate the transactions contemplated hereby, and
further agrees to provide any information requested by CBB for the preparation of any applications necessary to
consummate the transactions contemplated hereby. The Proxy Statement shall be prepared in compliance with
Schedule 14A under the Exchange Act, as amended, as if Bancorp were a public reporting company under such
Exchange Act. Bancorp shall afford CBB a reasonable opportunity to review the Proxy Statement and all such
applications and all amendments and supplements thereto before the filing thereof. Bancorp and Western covenant
and agree that, with respect to the information relating to Bancorp or Western, the Proxy Statement will comply
in all material respects with the provisions of applicable law, and will not contain any untrue statement of
material fact or omit to state any material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they were made, not misleading. Bancorp
and Western will use their commercially reasonable efforts to obtain all Consents necessary to effect the Stock
Purchase, the Merger, the Western Dividend, and sale of WSPI and WSCDC and the transactions contemplated herein.
6.9 Stock Purchase. Bancorp and Western shall, at the request of CBB, (i) take all necessary corporate and
---------------
other action, to adopt and approve the Stock Purchase (ii) execute, deliver, and where appropriate, file any and
all documents necessary or desirable to permit the Stock Purchase and (iii) take and cause to be taken any other
action to permit the consummation of the transactions contemplated in connection with the Stock Purchase.
Neither Bancorp or Western shall take, or cause any of the Western Subsidiaries to take, any action that would
prevent such performance.
6.10 Merger. Bancorp and Western shall, at the request of CBB, (i) take all necessary corporate and other
------
action, to adopt and approve the Merger, (ii) execute, deliver, and, where appropriate, file any and all
documents necessary or desirable to permit the Merger immediately following the Stock Purchase, and (iii) take
and cause to be taken any other action to permit the consummation of transactions contemplated in connection with
the Merger. Neither Bancorp nor Western shall take, or cause any of the Western Subsidiaries to take, any action
that would prevent such performance.
6.11 Any Bancorp Subsidiary. At the request of CBB, Bancorp shall promptly take any other action necessary
-----------------------
to merge any Western Subsidiary into Western or any other Western Subsidiary, dissolve any Western Subsidiary as
a corporation or spin-off of such Western Subsidiary to Bancorp, on terms reasonably satisfactory to CBB.
6.12 Disposition of Employee Benefit Plans. Except as otherwise contemplated by this Agreement, Bancorp and
--------------------------------------
Western shall take all actions necessary to cause, on or before the Closing Date and on terms reasonably
acceptable to CBB, (i) the transfer of sponsorship of the Western Security Bank, N.A. Employees' Stock Ownership
Plan from Western to Bancorp, (i) the termination of all other Plans and (ii) payment of all benefits payable
under such Plans..
6.13 Pre-Closing Adjustments. In addition to the adjustments otherwise required by this Agreement, at or
------------------------
before the Effective Time of the Stock Purchase, Bancorp and Western shall make such additional accounting
entries or adjustments, including charge-offs of loans, as CBB shall direct in order to implement its plans
following the closing or to reflect expenses and costs related to the Stock Purchase and the Merger; provided,
however, (a) Bancorp and Western shall not be required to take such additional actions more than one business day
prior to the Stock Purchase or prior to the time CBB agrees in writing that all of the conditions to its
obligations to close as set forth in Article 12 have been satisfied or waived and (b) based upon consultation
with counsel and accountants for Bancorp and Western, no such additional adjustment shall (i) require any filing
with any Governmental Entity or (ii) violate any Rule applicable to Bancorp or Western. The recording of any
such additional adjustment shall not be deemed to imply any misstatement of previously furnished financial
statements or information.
6.14 Disposition of Assets. At least thirty (30) Business Days prior to the Closing Date, Bancorp and
----------------------
Western shall have used their respective best efforts to have entered into (or to cause WSCDC to have entered
into), in good faith an agreement for the sale of all the assets and liabilities of WSCDC which shall provide
that all the assets and liabilities shall be sold to a third party(ies) prior to the Effective Time of the Stock
Purchase. Such agreement shall be substantially in the form of Exhibit B attached hereto (the "WSCDC Asset Sale
---------
Agreement") and shall be in form and substance reasonably acceptable to CBB.
6.15 Prepayment of Notes. Prior to the Effective Time of the Stock Purchase, Bancorp shall
-------------------
use its best efforts to satisfy all of Bancorp's obligations under the Notes and to terminate the Note Agreements
and any and all Encumbrances securing Bancorp's obligations under the Notes, including, but not limited to,
Encumbrances on the capital stock of Western and preparation of all requisite notices, certificates and documents
under the Note Agreements to terminate such agreements on the Closing Date.
6.16 Salary Continuation Agreements. Prior to the Effective Time of the Stock Purchase, Western
------------------------------
shall use its best efforts to amend the Salary Continuation Agreements (the "Salary Continuation Agreements")
between Western and each of Xxxxxx Xxxxxxx, Xxxxxx X. Xxxxxx, Xxxx Xxxx, Xxxxxx Xxxxxx (collectively, the
"Current Executives") and Xxxxxxx X. Xxxxxxx (Xxxxxxx, with the Current Executives, the "Named Executives"), a
list of which is set forth on Schedule 6.16 hereto, to provide that upon consummation of the transactions
--------------
contemplated hereby, each of the Named Executives (or their spouses or estates, in the event of death of the
Named Executive) shall be entitled to receive the following respective amounts payable on the last day of every
month for a period of one hundred eighty (180) months following the Effective Time of the Stock Purchase: Messrs.
Xxxx, $10,000; Xxxxxx, $14,000; Xxxxxx, $11,500; Demieri, $10,000 and Xxxxxxx, $6,666.67 in lieu of all other
payments and benefits otherwise contemplated by the Salary Continuation Agreements; provided, however, that the
------------------
amendment to the Salary Continuation Agreement for Xx. Xxxxxx shall provide that the payments Xx. Xxxxxx is
entitled to pursuant to this Section shall not commence until the later of the date (i) Xx. Xxxxxx reaches the
age of 55 or (ii) Xx. Xxxxxx'x employment with the Surviving Bank shall cease. The amendments shall be in such
form as are acceptable to CBB, in its sole discretion.
6.17 Employment Agreements. Prior to the Effective Time of the Stock Purchase, Western shall
---------------------
use its best efforts to amend the employment agreements (the "Employment Agreements") between Western and each of
the Current Executives, a list of which is set forth on Schedule 6.17 hereto to provide that upon consummation of
-------------
the Stock Purchase, each of the Current Executives' shall be entitled to receive the onetime severance benefit
contemplated by the Letter Agreement referred to in Article 13 hereof, in lieu of all other payments and benefits
otherwise contemplated by the Employment Agreements. The amendments shall be in such form as is reasonably
acceptable to CBB.
6.18 Lease for Branch. Prior to the Effective Time of the Stock Purchase, Bancorp shall
----------------
enter into, and cause WSPI to enter into, a lease with CBB for the property located at 0000 Xxxx Xxxxxxx Xxxxxx,
Xxxxxxx, Xxxxxxxxxx 00000, effective as of the Effective Time of the Stock Purchase, for a term of no less than
ten (10) years with two options to renew said lease for an additional five (5) years each, in the form attached
hereto as Exhibit C (the "CBB Lease Agreement") and shall be in form and substance reasonably acceptable to CBB.
---------
6.19 Insurance Coverage. Prior to the Effective Time of the Stock Purchase, Bancorp and
------------------
Western shall use its best efforts to obtain directors' and officers' liability insurance policies (the "Tail
Insurance Coverage") covering, for a period of five (5) years following the Effective Time of the Stock Purchase,
the Covered Persons and any persons who become Covered Persons between the date hereof and the Effective Time of
the Stock Purchase. Such policy(ies) shall cover acts or omissions occurring prior to the Effective Time of the
Stock Purchase, and shall be no less protective in terms of coverage or limitations than that now possessed by
Bancorp, Western and the Western Subsidiaries. Such coverage shall include, but not be limited to, acts relating
to this Agreement.
6.20 Repayment of WSPI Obligation. Prior to the Effective Time of the Stock Purchase, Western shall
----------------------------------
cause WSPI to repay to Western the net proceeds of any financing WSPI receives from an unaffiliated third party
on the branch building WSPI owns, as payment against advances outstanding from Western to WSPI. The amount of
such payment shall be no less than $7.5 million (the "WSPI Repayment") and shall be made on terms and conditions
reasonably satisfactory to CBB.
6.21 Sale of WSPI. Prior to the Effective Time of the Stock Purchase, and following the WSPI Repayment,
------------
Western will sell all of the outstanding shares of WSPI to Bancorp for an amount equal to the amount of Western's
investment in and advances to WSPI (computed as if all remaining advances have been contributed to capital)
immediately prior to the Stock Purchase. Such sale shall be made pursuant to the terms of the WSPI Purchase
Agreement, substantially in the form attached hereto as Exhibit D and shall be in form and substance reasonably
----------
acceptable to CBB.
6.22 Western Dividend. Bancorp and Western shall promptly prepare or cause to be prepared all applications
-----------------
necessary to obtain the Consents for the Western Dividend, the WSPI Repayment, and the sale of the outstanding
shares of WSPI to Bancorp, all to be effective prior to the Effective Time of the Stock Purchase.
Article 7.
COVENANTS OF CBB PENDING EFFECTIVE TIME OF THE STOCK PURCHASE
-------------------------------------------------------------
CBB covenants and agrees with Bancorp and Western as follows:
7.1 Limitation on Conduct Prior to Effective Time of the Stock Purchase. Between the date hereof and the
------------------------------------------------------------------------
Effective Time of the Stock Purchase, except as contemplated by this Agreement and subject to requirements of law
and regulation generally applicable to California state banks, CBB shall not, without the prior written consent
of Bancorp and Western, which consent shall not be unreasonably withheld, take any action which would or is
reasonably likely to (i) adversely affect the ability of CBB to obtain any necessary approvals of any
Governmental Entity required for the transactions contemplated hereby; (ii) adversely affect CBB's ability to
perform its covenants and agreements under this Agreement; or (iii) result in any of the conditions to the
performance of CBB's obligations hereunder, as set forth in Articles 10 or 12 herein not being satisfied.
7.2 Applications. CBB will use its best efforts to promptly prepare and file or cause to be prepared and
------------
filed (i) an application for approval of the Stock Purchase with the FDIC, OCC, FRB and the DFI; (ii) an
application for approval of the Merger with the FDIC and the DFI; and (iii) any other applications necessary to
consummate the transactions contemplated hereby. CBB will use its commercially reasonable efforts to obtain all
Consents necessary to effect the Stock Purchase and the Merger.
7.3 Notices; Reports. CBB will promptly notify Bancorp of any event of which CBB obtains knowledge which
-----------------
may materially and adversely affect the ability of CBB to consummate the transactions contemplated herein.
7.4 Regulatory Proceedings Regarding CBB. CBB will promptly notify Bancorp and Western of any notice by any
--------------------------------------
Governmental Entity or the initiation of any enforcement action or civil money penalty action against CBB or any
adverse change in the CRA rating of CBB that materially and adversely affects the ability of CBB to consummate
the transactions contemplated herein.
Article 8.
ADDITIONAL COVENANTS
--------------------
The parties hereto hereby mutually covenant and agree with each other as follows:
8.1 Best Efforts. Subject to the terms and conditions of this Agreement, each party will use its best
-------------
efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement
as promptly as practical, including cooperation in preparation of the Applications identified in Section 6.8 and
7.2 of this Agreement. Each party will use its best efforts to resolve and correct all typographical or other
administrative errors which may arise in or relating to this Agreement or in the other documents prepared or
executed in connection herewith.
8.2 Public Announcements. No press release or other public disclosure of matters related to this Agreement
---------------------
or any of the transactions contemplated hereby shall be made by CBB, Bancorp, Western or any of their Affiliates,
unless the other Parties shall have provided their prior consent to the form and substance thereof; provided,
--------
however, that nothing herein shall be deemed to prohibit any Party hereto, following notice to the other Party,
-------
from making any disclosure which its counsel deems necessary or advisable in order to fulfill such Party's
disclosure obligations imposed by law.
8.3 Environmental Assessment and Remediation. CBB may cause to be prepared at CBB's sole cost and expense
-------------------------------------------
within 60 days of the date of this Agreement one or more phase I environmental investigations with respect to the
Real Property set forth on Schedule 4.11. In the event any such phase I environmental investigation report, or
--------------
any such report which Bancorp or Western has already obtained on any of the Real Property set forth on Schedule
---------
4.11, discloses facts which, in the sole discretion of CBB, warrant further investigation, CBB shall provide
----
written notice to Bancorp, and Bancorp shall be required to cause to be completed within 30 days of such written
notice, at the sole cost and expense of CBB, a phase II environmental investigation and report with respect to
such property. The consultant engaged by Bancorp to conduct such investigation and provide such report shall be
acceptable to CBB. CBB shall have 10 days from the receipt of such investigation report to object thereto, which
objection shall be by written notice. In the event of any such objection, CBB shall engage an environmental
consultant satisfactory to Bancorp who shall provide an estimate of the cost of taking any remedial action
recommended or suggested in such phase II environmental investigation report, or which is required by law, or
which is determined to be prudent by CBB, in its sole discretion, and, unless the estimated cost of such
Remediation for which an independent third-party consultant, jointly selected by Bancorp and CBB, would determine
Bancorp or Western would be responsible for paying is in excess of $100,000 (and written notice thereof provided
by Bancorp to CBB) Bancorp shall immediately commence such Remediation, all at the sole cost and expense of
Bancorp. In the event such environmental consultant determines that the estimated cost of such remediation for
which an independent third party consultant, jointly selected by Bancorp and CBB would determine Bancorp or
Western would be responsible for paying is in excess of $100,000, CBB shall have the right to terminate the
Agreement pursuant to Section 13.1.11 hereof before the expiration of 20 days from the date of such written
notice.
CBB agrees to keep confidential and not to disclose any nonpublic information obtained
in the course of such environmental investigation relating to environmental contamination or suspected
contamination of any property on Schedule 4.11, except as required by law.
-------------
Article 9.
TAX MATTERS
-----------
9.1 Tax Returns.
-----------
(a) Bancorp shall have the exclusive authority and obligation to prepare and timely file, or cause to be
prepared and timely filed, all Returns of Bancorp, Western and the Bancorp Subsidiaries that are due with respect
to any taxable year or other taxable period ending on or prior to the Closing Date (hereinafter "Pre-Closing
Returns"). Such authority shall include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the income, properties and operations of Bancorp,
Western and the Bancorp Subsidiaries shall be reported or disclosed in such Returns. Bancorp shall provide to
CBB drafts of all Returns of Western and the Western Subsidiaries required to be prepared and filed by Bancorp
under this Section 9.1(a) at least forty-five (45) days prior to the due date (including extensions) for the
filing of such Returns. At least fifteen (15) days prior to the due date (including extensions) for the filing
of such Returns, CBB shall notify Bancorp of the existence of any objection (specifying in reasonable detail the
nature and basis of such objection) CBB may have to any items set forth on such draft Returns.
(b) Except as provided in Section 9.1(a), CBB shall have the exclusive authority and obligation to (i)
prepare and timely file, or cause to be prepared and timely filed, (A) all Returns of Western and the Western
Subsidiaries (other than WSPI), (B) all Returns of Western (or CBB as the successor of Western) and the Western
Subsidiaries (other than WSPI) that are due with respect to any Overlap Period (as defined in Section 9.2 hereof)
(hereinafter "Overlap Period Returns"), and (ii) pay and discharge all Taxes for any Overlap Period. Such
authority shall include, but not be limited to, the determination of the manner in which any items of income,
gain, deduction, loss or credit arising out of the income, properties and operations of Western and the Western
Subsidiaries (other than WSPI) shall be reported or disclosed on such Returns; provided, however, that items set
-------- -------
forth on such Returns relating to the income, properties and operations of Western (or CBB as the successor of
Western) or the Western Subsidiaries shall be treated in a manner consistent with Western's past practices with
respect to the treatment of such items, unless otherwise required by law. CBB shall provide to Bancorp drafts of
all Returns of Western and the Western Subsidiaries required to be prepared and filed by the Purchaser under this
Section 9.1(b) at least forty-five (45) days prior to the due date (including extensions) for the filing of such
Returns. At least fifteen (15) days prior to the due date (including extensions) for the filings of such
Returns, Bancorp shall notify CBB of the existence of any objection (specifying in reasonable detail the nature
and basis of such objection) that Bancorp may have to any items set forth on such draft Returns.
(c) CBB and Bancorp agree to consult and resolve in good faith any objection that either may have to the
Returns. In the event CBB and Bancorp are unable to resolve an objection pursuant to Section 9.1(a), then with
respect to any Pre-Closing Return and any Overlap period Return, as to any items which affect any Taxes
apportioned to a Pre-Closing Period under Section 9.2 hereof, upon Bancorp providing an opinion of a law firm
as shall be reasonably accptable to CBB that the position Bancorp wishes to take has a realistic possibility of
success in a court with jurisdiction, such Return shall take such position and shall be filed with the
appropriate Governmental Authority.
9.2 Apportionment of Taxes. All Taxes with respect to the income, property or operations of Western (or CBB
-----------------------
as the successor Western) and the Western Subsidiaries that relate to a taxable year or other taxable period
beginning before and ending after the Closing Date (an "Overlap Period"), including any refunds of such Taxes,
shall be apportioned between the Pre-Closing Period and the portion of such taxable year or other taxable period
after the Closing Date (the "Post-Closing Period") as though the taxable year of Western terminated at the close
of business on the Closing Date, and based on accounting methods, elections and conventions that do not have the
effect of distorting income and expenses. Pursuant to Article 15, Bancorp shall indemnify CBB for the payment of
all Taxes of Bancorp, Western and the Bancorp Subsidiaries which are attributable to all Pre-Closing Periods
(including, without limitation, all Taxes relating to any Pre-Closing Period apportioned to Bancorp in an Overlap
Period) and all Taxes of Bancorp, WSMC and WSPI which are attributable to all Post-Closing Periods. CBB shall be
liable (and Bancorp shall not be liable) for the payment of all Taxes of Western and the Western Subsidiaries
(other than WSPI) which are attributable to any Post-Closing Periods (including, without limitation, all Taxes
relating to any Post-Closing Period apportioned to Western and the Western Subsidiaries in an Overlap Period).
Notwithstanding anything to the contrary in the foregoing provisions of this Section 9.2, any Taxes which are
attributable to an election under Section 338 of the Code shall be apportioned to a Post-Closing Period and shall
be the responsibility of CBB (and not Bancorp).
9.3 Refunds. Any refund of Taxes relating to Western received by Western or CBB after the Closing Date and
-------
with respect to either (i) any Tax period ending on or before the Closing Date; or (ii) any Overlap Period to the
extent apportioned to the Pre-Closing Period under Section 9.2 hereof, shall be paid by CBB to Bancorp by making
payment to Bancorp within ten Business Days after such refund is received by Western or CBB.
9.4 Cooperation, Audits. In connection with the preparation of Pre-Closing Returns and Overlap Period
--------------------
Returns, audit examinations and any administrative or judicial proceedings relating to such Returns, CBB, on the
one hand, and Bancorp, on the other hand, will cooperate fully with each other, including, but not limited to,
the furnishing or making available during normal business hours of records, personnel (as reasonably required),
books of account, powers of attorney or other materials necessary or helpful for the preparation of such Returns,
the conduct of audit examinations or the defense of claims by Tax authorities as to the imposition of Taxes with
respect to such Returns.
9.5 Controversies.
-------------
(a) CBB shall promptly notify Bancorp in writing upon receipt by CBB or any Affiliate of CBB of written
notice of any inquiries, claims, assessments, audits or similar events with respect to Taxes relating to a
Pre-Closing Period or an Overlap Period for which Bancorp may be liable for indemnification under this Agreement
(any such inquiry, claim, assessment, audit or similar event, a "Tax Matter").
(b) Bancorp, at its sole expense, shall have the exclusive authority to represent the interests of Western
(or CBB as the successor of Western) and the Western Subsidiaries with respect to any Tax Matter before the
Internal Revenue Service, any other taxing authority, any other governmental agency or authority or any court and
shall have the sole right to extend or waive the statute of limitations with respect to a Tax Matter and to
control the defense, compromise or other resolution of any Tax Matter, including responding to inquiries and
settling audits; provided, however, that Bancorp shall not enter into any settlement of or otherwise compromise
-------- -------
any Tax Matter that affects or may affect the Tax Liability of CBB or any Affiliate of CBB for any Post-Closing
Period, including the portion of an Overlap Period that is after the Closing Date (including, without limitation,
the imposition of income tax deficiencies, the reduction of asset basis or cost adjustments, the lengthening of
any amortization or depreciation periods, the denial of amortization or depreciation deductions or the reduction
or loss of credit carry forwards), without the prior written consent of CBB, which consent shall not be
unreasonably withheld.
(c) If Bancorp so elects to assume the defense of any Tax Matter:
(i) Bancorp shall proceed to defend such Tax Matter in a diligent manner with counsel reasonably
satisfactory to CBB;
(ii) CBB shall make available to Bancorp any non-privileged documents and materials in the possession of CBB
that may be necessary to the defense of such Tax Matter;
(iii) Bancorp shall keep CBB informed promptly of all material developments and events relating to such Tax
Matter; and
(iv) CBB shall have the right to participate (including by retaining legal counsel) at Bancorp's expense,
which expense shall include the reasonable fees and expenses of such retained legal counsel, in the defense of
such Tax Matter.
(d) If Bancorp does not elect to assume the defense of any such Tax Matter (or if, after initially assuming
such defense, Bancorp fails to actively and diligently assume such defense), CBB may proceed with the defense of
such Tax Matter on its own. If CBB so proceeds with the defense of any such Tax Matter on its own:
(i) All expenses relating to the defense of such Tax Matter shall be borne and paid exclusively by Bancorp;
(ii) Bancorp shall make available to CBB any documents and materials in the possession or control of Bancorp
that may be necessary to the defense of such Tax Matter;
(iii) CBB shall keep Bancorp promptly informed of all material developments and events relating to such Tax
Matter; and
(iv) CBB shall have the right to settle, adjust or compromise such Tax Matter with the consent of Bancorp,
which consent shall not be unreasonably withheld.
(e) Except as otherwise provided in this Section 9.5, CBB shall have the sole right to control any audit or
examination by any taxing authority, initiate any claim for refund or amend any Return, and contest, resolve and
defend against any assessment for additional Taxes, notice of Tax deficiency or other adjustment of Taxes of, or
relating to, the income, assets or operations of Western for all taxable periods.
9.6 Amended Returns. Bancorp shall not file or cause to be filed any amended Return without the prior
----------------
written consent of CBB, which consent shall not be unreasonably withheld. Western (or CBB as the successor of
Western) shall not file any amended Pre-Closing Return or Overlap Period Return without the prior written consent
of Bancorp, which consent shall not be unreasonably withheld.
9.7 Non-foreign Person Affidavit. Bancorp shall furnish to CBB on or before the Closing Date a non-foreign
------------------------------
person affidavit as required by Section 1445 of the Code, setting forth Bancorp's taxpayer identification number.
Article 10.
CONDITIONS PRECEDENT TO THE STOCK PURCHASE
------------------------------------------
The obligations of each of the Parties hereto to consummate the transactions
contemplated herein are subject to the satisfaction, on or before the Closing Date, of the following conditions:
10.1 Shareholder Approval. The Agreement and the transactions contemplated hereby shall have received all
---------------------
requisite approvals of the shareholders of Bancorp and Western.
10.2 No Judgments or Orders. No Rule shall be outstanding or threatened by any Governmental Entity which
----------------------
prohibits or restricts the effectuation of, or threatens to invalidate or set aside, the Stock Purchase, the
Merger, the Western Dividend, the WSPI Repayment, or any other transactions contemplated by this Agreement,
unless counsel to the party against whom such action or proceeding was instituted or threatened renders to the
other parties hereto an opinion that such Rule is without merit.
10.3 Regulatory Approvals. To the extent required by applicable law or regulation, all approvals or consents
---------------------
of any Governmental Entity, including, without limitation, those of the FRB, the OCC, the FDIC and the DFI shall
have been obtained or granted for the Stock Purchase, the Merger, the WSPI Purchase, the Western Dividend and the
transactions contemplated hereby and the applicable waiting period under all Rules shall have expired. All other
statutory or regulatory requirements for the valid completion of the transactions contemplated hereby shall have
been satisfied.
Article 11.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BANCORP AND WESTERN
--------------------------------------------------------------
All of the obligations of Bancorp to effect the transactions contemplated hereby shall
be subject to the satisfaction, on or before the Closing Date, of the following conditions, any of which may be
waived in writing by Bancorp and Western:
11.1 Legal Opinion. Bancorp and Western shall have received the opinion of Manatt, Xxxxxx & Xxxxxxxx, LLP,
--------------
dated as of the Closing Date, substantially in the Form of Exhibit E.
---------
11.2 Representations and Warranties; Performance of Covenants. All the covenants, terms and conditions of
-----------------------------------------------------------
this Agreement to be complied with and performed by CBB on or before the Closing Date shall have been complied
with and performed in all material respects. Each of the representations and warranties of CBB contained in
Article 5 hereof shall have been true and correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such statement shall be true and correct
in all respects) on and as of the date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date or for changes expressly contemplated by this Agreement) on and as of the
Closing Date, with the same effect as though such representations and warranties had been made on and as of the
Closing Date.
11.3 Authorization of Stock Purchase and Merger. All actions necessary to authorize the execution, delivery
-------------------------------------------
and performance of this Agreement by CBB and the consummation of the transactions contemplated hereby and thereby
shall have been duly and validly taken by the Board of Directors of CBB, as required by applicable law.
11.4 Western Dividend. Western shall have received all requisite approvals of Governmental Entities to
-----------------
declare and pay the Western Dividend at or prior to the Effective Time of the Stock Purchase.
11.5 Officers' Certificate. There shall have been delivered to Bancorp on the Closing Date a certificate
----------------------
executed by the Chief Executive Officer and the Chief Financial Officer of CBB certifying, to the best of their
knowledge, compliance with all of the provisions of Sections 11.2 and 11.3.
Article 12.
CONDITIONS PRECEDENT TO OBLIGATIONS OF CBB
------------------------------------------
All of the obligations of CBB to effect the transactions contemplated hereby shall be
subject to the satisfaction, on or before the Closing Date, of the following conditions, any of which may be
waived in writing by CBB:
12.1 Legal Opinion. CBB shall have received the opinion of Horgan, Rosen, Beckham & Xxxxx, attorneys for
--------------
Bancorp and Western, or such other counsel reasonably acceptable to CBB, dated as of the Closing Date,
substantially in the form of Exhibit F.
---------
12.2 Representations and Warranties; Performance of Covenants. All the covenants, terms and conditions of
-----------------------------------------------------------
this Agreement to be complied with and performed by Bancorp and Western at or before the Closing Date shall have
been complied with and performed in all material respects. Each of the representations and warranties of Bancorp
and Western contained in Article 4 hereof shall have been true and correct in all material respects (except that
where any statement in a representation or warranty expressly includes a standard of materiality, such statement
shall be true and correct in all respects) on and as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date or for changes expressly contemplated by this
Agreement) on and as of the Closing Date, with the same effect as though such representations and warranties had
been made on and as of the Closing Date. It is understood and acknowledged that the representations being made
on and as of the Closing Date shall be made without giving effect to any update with respect to the Bancorp
Schedules in accordance with Section 6.2.13.
12.3 Authorization of Stock Purchase and Merger. All actions necessary to authorize the execution, delivery
-------------------------------------------
and performance of this Agreement and the Agreement of Merger, and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the Board of Directors and shareholders
of Bancorp and Western, as appropriate, and Bancorp shall have full power and right to sell the stock of Western
to CBB and Western shall have full power and right to merge pursuant to the Agreement of Merger.
12.4 Regulatory Approvals and Related Conditions. Any and all Consents of any Governmental Entity which are
---------------------------------------------
necessary to consummate the Stock Purchase and the Merger or any other transactions contemplated hereby shall
have been granted without the imposition of any condition which CBB deems, in its sole and absolute opinion, to
materially adversely affect it or be materially burdensome.
12.5 Third-Party Consents. Bancorp, Western and each Western Subsidiary shall have obtained all Consents of
---------------------
other parties to their respective mortgages, notes, leases, franchises, agreements, licenses and permits as may
be necessary to permit the Stock Purchase and the Merger and the transactions contemplated herein to be
consummated without a default, acceleration, breach or loss of rights or benefits thereunder.
12.6 Absence of Certain Changes. Between the date of this Agreement and the Effective Time of the Stock
----------------------------
Purchase, there shall not have occurred any event that has had or could reasonably be expected to have,
individually, or in the aggregate, a material adverse effect on the business, financial condition, results of
operations or prospects of Western whether or not such event, change or effect is reflected in the Bancorp Lists
as amended or supplemented after the date of this Agreement.
12.7 Shareholder's Agreements. Concurrently with the execution of this Agreement, each director of Bancorp
-------------------------
and Western shall have executed and delivered to CBB agreements substantially in the form of Exhibit G hereto.
---------
12.8 Agreements Not to Solicit. Concurrently with the execution of this Agreement, each director of Bancorp
-------------------------
and Western shall have executed and delivered to CBB agreements substantially in the form of Exhibit H hereto;
---------
provided, however, Xxxxxx Xxxxxx shall have executed and delivered to CBB an agreement substantially in the form
of Exhibit H-1.
-----------
12.9 Employee Benefit Plans; Salary Continuation Agreements and Employment Agreements. CBB shall have
----------------------------------------------------------------------------------------
received satisfactory evidence that Bancorp has cooperated with CBB with respect to the Plans and has terminated
such Plans that CBB has requested be terminated.
12.10 Salary Continuation Agreements and Employment Agreements. CBB shall have received satisfactory evidence
----------------------------------------------------------
that effective immediately prior to the Effective Time of the Stock Purchase, the Salary Continuation Agreements
between Western and the Current Executives shall have been amended in accordance with Section 6.16 to provide
that upon consummation of the transactions contemplated hereby, each of the Current Executives (or their spouses
or estates) shall be entitled to receive, each month for a period of one hundred eighty (180) months following
the Stock Purchase to the amounts specified in Section 6.16. In addition, CBB shall have received satisfactory
evidence that each of the Employment Agreements between Western and the Current Executives has been amended to
provide that each of the Current Executives shall be entitled to receive the onetime severance benefit provided
for in the Letter Agreement referred to in Article 13 hereof, in lieu of all other payments and benefits
otherwise contemplated by the Employment Agreements.
12.11 Resignations. CBB shall have received evidence satisfactory to it that all directors and officers of
------------
Western have resigned effective immediately prior to the Effective Time of the Stock Purchase.
12.12 Disposition of Assets. CBB shall have received evidence satisfactory to it that the assets and
-----------------------
liabilities of WSCDC have been sold pursuant to the WSCDC Asset Sale Agreement substantially in the form of
Exhibit B.
---------
12.13 Loan Loss Reserve. Western shall have in effect on the Closing Date an allowance for loan and lease
------------------
losses in an amount not less than the greater of the amount determined by the method customarily used by Western
and 2.5% of total outstanding loans of Western on a consolidated basis.
12.14 Deposits and Loans. The total average deposits of Western on a consolidated basis for the three months
------------------
preceding the Closing Date and the total average loans of Western on a consolidated basis for the three months
preceding the Closing Date shall not be less than $115 million and $85.0 million, respectively.
12.15 Tax Opinion. CBB shall have received an opinion from Manatt, Xxxxxx & Xxxxxxxx, LLP to the effect that
-----------
(i) the Stock Purchase constitutes a qualified stock purchase under Section 338 of the Code, and (ii) the Merger,
will qualify as a tax-free subsidiary liquidation within the meaning of Section 332 of the Code.
12.16 Expense Report. At least five Business Days prior to the Closing Date, all attorneys, accountants,
---------------
investment bankers and other advisors and agents for Bancorp and Western shall have submitted to Bancorp and
Western (with a copy to CBB) estimates of their fees and expenses for all services rendered in any respect in
connections with the transactions contemplated hereby and their reasonable estimates of the amounts of their fees
and expenses they expect to incur prior to the Closing Date. Bancorp shall use such estimates in its
determination of the Transaction Costs. Prior to the Closing Date (i) such advisors shall have submitted their
final bills for such fees and expenses to Bancorp and Western for services rendered with a copy to be delivered
to CBB, and based on such summary, Bancorp and Western shall have prepared and submitted a final calculation of
such fees and expenses and (ii) Bancorp, Western or the Bancorp Subsidiaries, as applicable, shall have accrued
and paid the amount of such fees and expenses as calculated above after CBB has been given an opportunity to
review all such bills and the calculation of such fees and expenses, and (iii) such advisors shall have released
Western, the Western Subsidiaries, as appropriate, and the Surviving Bank from liability, or shall have advised
them in writing that, upon payment in full of such amounts, they shall have no liability for any fees or expenses
to such advisors.
12.17 Lease for Branch. Effective as of the Closing, CBB shall have entered into a lease for the branch
-----------------
located at 0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 substantially in the form of the CBB Lease
Agreement attached hereto as Exhibit C.
---------
12.18 Audited Financials. H&B shall have audited the consolidated financial
------------------
statements of Bancorp for the year ended December 31, 2001, and shall have delivered a copy of such audited
financial statements to CBB immediately upon completion of their audit and audit procedures, but in no event less
than twenty-five (25) Business Days prior to the Closing Date.
12.19 Tail Insurance Coverage. Bancorp and Western shall have obtained the Tail-Insurance Coverage, as
-----------------------
provided in Section 6.19, on terms reasonably satisfactory to CBB.
12.20 Notes. Each of the holders of the Notes shall have submitted their respective Note(s) for redemption
-----
pursuant to the terms of the Note Agreements, so that effective as of the Closing: (i) all of Bancorp's
obligations pursuant to the Note Agreements shall have been satisfied; (ii) all Encumbrances on any of the assets
of Bancorp pursuant to the terms of the Note Agreements shall have been terminated and the certificates
evidencing the capital stock of Western shall have been returned to Bancorp, free and clear of all Encumbrances;
and (iii) the Note Agreements shall have been terminated.
12.21 MOU. As of the Effective Time of the Stock Purchase, the Comptroller of the Currency shall have
---
terminated or set aside the MOU with Western, and shall have acknowledged that CBB and the Surviving Corporation
shall not have any successor liability under such MOU resulting from or concerning the regulatory problems or
violations of Western set forth therein.
12.22 Purchase of WSPI. CBB shall have received evidence satisfactory to it that WSPI has been sold pursuant
----------------
to the WSPI Purchase Agreement, substantially in the form attached hereto as Exhibit D and that Western has
---------
received the WSPI Repayment. Without the consent of Bancorp and Western, CBB may not waive this condition.
12.23 Western Dividend. Western shall have received all requisite approvals from Governmental Entities to
-----------------
declare and pay the Western Dividend at or prior to the Effective Time of the Stock Purchase.
12.24 Officers' Certificate. There shall have been delivered to CBB on the Closing Date a certificate
----------------------
executed by the Chief Executive Officer and the Chief Financial Officer of Bancorp certifying, to the best of
their knowledge, compliance with all of the provisions of Sections 12.2, 12.3, 12.4, 12.5, 12.9, 12.14, 12.15,
12.20, 12.21, 12.22 and 12.23.
Article 13.
EMPLOYEE BENEFITS
-----------------
13.1 Employee Benefits.
-----------------
Except as otherwise provided in this Agreement or pursuant to the terms of such Plans,
all Plans of Western will be discontinued, and employees of Western who become employees of CBB shall become
eligible for the employee benefit plans of CBB on the same terms as such plans and benefits are generally offered
from time to time to employees of CBB and its subsidiaries in comparable positions with CBB or its subsidiaries.
For purposes of determining such employment eligibility and vesting under the employee benefit plans of CBB
(other than for the CVB 401(k) and Profit Sharing Plan), CBB shall recognize such employees' years of service
with Western beginning on the date such employees commenced employment with Western through the Effective Time of
the Stock Purchase.
CBB also agrees to honor all commitments of Western under the Salary Continuation Agreements,
subject to compliance with Section 12.10 herein. The parties hereto further agree that certain other matters
respecting employee benefits shall be dealt with in a letter, dated the date hereof, between the parties and
hereby incorporated by reference and made a part hereof.
Article 14.
TERMINATION
-----------
14.1 Termination. This Agreement may be terminated at any time prior to the Effective Time of the Stock
-----------
Purchase, whether before or after approval by the shareholders of Bancorp and Security Acquisition as follows and
in no other manner:
14.1.1 By mutual agreement of the Parties, in writing;
14.1.2 By CBB immediately upon the failure of the shareholders of Bancorp to give the requisite approval of
this Agreement;
14.1.3 By Bancorp and Western, if CBB should materially default in the observance or in the due and timely
performance of any of its covenants and agreements herein contained and such default shall not have been fully
cured within 10 Business Days after written notice specifying the alleged default;
14.1.4 By CBB, if Bancorp or Western should materially default in the observance or in the due and timely
performance of any of its covenants and agreements herein contained and such default shall not have been fully
cured within 10 Business Days after written notice specifying the alleged default;
14.1.5 By CBB if the FRB shall have not granted a waiver of the application requirements of the BHC Act or if
the FDIC, the Comptroller or the Commissioner shall have finally declined to approve the Stock Purchase or the
Merger or if the Consent of any other Governmental Entity necessary to contemplate the transactions contemplated
hereby has not been obtained;
14.1.6 By Bancorp, Western or CBB if any conditions set forth in Article 10 shall not have been met by
September 30, 2002; provided, however, that this Agreement shall not be terminated pursuant to this Section
14.1.6 if the relevant condition shall have failed to occur as a result of any act or omission of the party
seeking to terminate.
14.1.7 By Bancorp and Western if any of the conditions set forth in Article 11 shall not have been met, or by
CBB if any of the conditions set forth in Article 12 shall not have been met, by September 30, 2002, or such
earlier time as it becomes apparent that such condition shall not be met, provided, however, that this Agreement
shall not be terminated pursuant to this Section 14.1.7 if the relevant condition shall have failed to occur as a
result of any act or omission of the party seeking to terminate;
14.1.8 By CBB, at any time, if Bancorp or Western violates the covenants set forth in Section 6.1.14;
14.1.9 By CBB, at any time, if Bancorp or Western has received an unsolicited offer from a Person other than
CBB to effect a Competing Transaction and takes any action referred to in the last sentence of Section 6.1.14,
and within 10 days after receipt of such unsolicited offer, Bancorp or Western has not advised CBB in writing
that no further action will be taken with respect to such offer;
14.1.10 By CBB, at any time, if the Board of Directors of Bancorp withdraws its recommendation pursuant to
Section 6.6;
14.1.11 By CBB under the circumstances set forth in Section 8.3.
14.2 Effect of Termination; Liquidated Damages; Expenses.
---------------------------------------------------
(a) In the event of termination of this Agreement by either CBB, on the one hand, and Bancorp on the other
hand, as provided in Section 14.1, neither CBB, on the one hand, or Bancorp and Western, on the other than, shall
have any further liability or obligation to the other, except with respect to this Section 14.2, Articles 9 or
15, or Sections 8.2, 16.1 and 16.10 of this Agreement, or from any liability or damage to any other Party hereto
arising out of, in connection with or otherwise relating to, directly or indirectly, said Party's willful and
material breach, default or failure in performance of any of its covenants, agreements, duties or obligations
arising hereunder; provided, however, that if such termination shall result from an election to terminate by CBB
-------- -------
pursuant to subsections 14.1.2, 14.1.9 or 14.1.10, Western and Bancorp shall wire transfer to CBB as reasonable
and full liquidated damages and reasonable compensation for the loss sustained as a result of the transactions
contemplated hereby not being consummated, and not as a penalty or forfeiture, the aggregate sum of $325,000,
within two Business Days following notice of such election, plus CBB's Expenses.
(b) Bancorp and Western agree that if this Agreement is terminated by CBB pursuant to Section 14.1.4 or
14.1.11, Bancorp and Western shall promptly and in any event within 10 days after such termination, pay CBB all
Expenses of CBB, but not to exceed $200,000. CBB agrees that if this Agreement is terminated by Western or
Bancorp pursuant to Section 14.1.3, CBB shall promptly and in any event within 10 days after such termination,
pay all Expenses of Western and Bancorp, but not to exceed $100,000.
(c) Except as otherwise provided in this Section 14.2 or elsewhere in this Agreement, all Expenses incurred
by Bancorp, Western and CBB in connection with or related to the authorization, preparation and execution of this
Agreement, the solicitation of shareholder approval and all other matters related to the closing of the
transactions contemplated hereby, including, without limitation of the generality of the foregoing, all fees and
expenses of agents, representatives, counsel and accountants employed by such Party or its Affiliates, shall be
borne solely and entirely by the Party which has incurred the same. Notwithstanding the foregoing, CBB shall pay
all filing fees in connection with securing approval or waiver of approval of the transactions contemplated by
this Agreement by the FRB, the FDIC, the Comptroller and the Commissioner, and Bancorp shall pay all Expenses so
incurred in obtaining approval of the Bancorp shareholders of the transactions contemplated by this Agreement.
14.3 Force Majeure. Bancorp, Western and CBB agree that, notwithstanding anything to the contrary in this
--------------
Agreement, in the event this Agreement is terminated as a result of a failure of a condition, which failure is
due to a natural disaster or other act of God, or an act of war, or an act of terrorism, and provided neither
party has materially failed to observe the obligations of such party under this Agreement, neither party shall be
obligated to pay to the other party to this Agreement any Expenses or otherwise be liable hereunder.
Article 15.
INDEMNIFICATION
---------------
15.1 Indemnification by Bancorp. Bancorp shall indemnify, defend and hold harmless (i) CBB, (ii) each of
---------------------------
CBB's Affiliates, assigns and successors and (iii) each of CBB's respective shareholders, directors, officers,
employees, agents, attorneys and representatives (collectively, the "CBB Indemnified Persons"), from and against
any and all Losses which may be incurred or suffered by any such party and which may arise out of or result from:
(a) any breach of any representation, warranty, covenant or agreement of Bancorp or Western contained in
this Agreement or in any other documents or agreement delivered hereto by Bancorp or Western including, without
limitation, any attempt (whether or not successful) by any Person to cause or require CBB to pay, perform or
discharge any debt, obligation, deficiency, liability or commitment the existence of which constitutes a breach
of any such representation, warranty, covenant or agreement;
(b) any litigation, arbitration, governmental investigation, suit, action or other proceeding involving
Bancorp, Western, the Bancorp Subsidiaries or CBB which pertains to acts or omissions of Bancorp, Western or the
Bancorp Subsidiaries prior to the Closing Date (regardless of when such litigation, arbitration, governmental
investigation, suit action or other proceeding is instituted);
(c) all Taxes imposed on or asserted against the properties, income, or operations of Bancorp or its
Affiliated Group for all Pre-Closing Periods, and for Bancorp, WSCDC, WSPI and WSMC for all Post-Closing Periods;
(d) any and all debts, liabilities and obligations of Bancorp, WSCDC, WSMC or WSPI, direct or indirect,
fixed, contingent or otherwise, known or unknown, and whether or not then due or payable, which exists at or as
of the Closing Date or which arises after the Closing Date;
(e) any and all debts, liabilities and obligations of Bancorp, WSPI, WSCDC or WSMC set forth in any and all
agreements, contracts, (whether written or oral) or other instruments to which Bancorp, WSPI, WSCDC or WSMC is a
party or by which any of their properties are bound;
(f) any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs and expenses,
including, without limitation, legal fees and expenses incurred in enforcing this indemnity.
Notwithstanding the foregoing provisions of this Section 15.1 to the contrary, the following
limitations with respect to the indemnification obligations of Bancorp shall apply:
(i) Bancorp shall not be liable for any amounts under
this Section 15.1 unless and until the aggregate of Losses suffered by the CBB Indemnified Person(s) from all
claims for indemnification exceed $25,000, in which case Bancorp shall be liable for the full amount of Losses
suffered by the CBB Indemnified Person(s), including the first $25,000;
(ii) The indemnification obligations of Bancorp in connection with
Losses arising from the matters set forth in Section 15.1(a) and 15.1(b) shall terminate two (2) year after the
Closing Date; provided, however, that the indemnification obligation shall survive with respect to any claim
which is asserted in writing prior to the expiration of the two (2) year period; and
(iii) In no event shall Bancorp be liable to the CBB Indemnified
Person(s) for amounts under Section 15.1(a) or (b) in excess of $3,000,000;
provided, however, that the limitations set forth in (ii) and (iii) immediately above shall not
apply with respect to any Loss which is the result of fraud or intentional misrepresentation on the part of
Bancorp or Western.
15.2 Indemnification by CBB. CBB shall indemnify, defend and hold harmless Bancorp from and against any
-----------------------
Losses arising out of or due to a breach of any representation, warranty, covenant or agreement of CBB contained
in this Agreement or in any document delivered hereto by CBB including, without limitation, any attempt (whether
or not successful) by any Person to cause or require Bancorp to pay, perform or discharge any debt, obligation,
deficiency, liability or commitment the existence of which constitutes a breach of any such representation,
warranty covenant or agreement. CBB shall not be liable for any amounts under this Section 15.2 unless and until
the aggregate of Losses suffered by Bancorp from all claims for indemnification exceed $25,000, in which case CBB
shall be liable for the full amount of Losses suffered by Bancorp, including the first $25,000.
15.3 Indemnification Procedures.
--------------------------
(a) In the event that any suit, action or proceedings shall be instituted, or that any claim or demand
(collectively, a "Claim") shall be asserted by any Person in respect of which payment may be sought under Section
15.1 or 15.2 hereof, the party seeking indemnification (the "Indemnified Party") shall promptly cause written
notice of the assertion of any Claim of which it has knowledge which is covered by this indemnity to be forwarded
to the indemnifying party (the "Indemnifying Party"). The Indemnifying Party shall have the right, at its sole
option and expense, to be represented by counsel of its choice, which must be reasonably satisfactory to the
Indemnified Party, and to defend against, negotiate, settle or otherwise deal with any Claim which relates to any
Losses indemnified against hereunder. If the Indemnifying Party elects to defend against, negotiate, settle or
otherwise deal (as provided herein) with any Claim which relates to any Losses indemnified against hereunder, it
shall within five (5) days (or sooner, if the nature of the Claim so requires) notify the Indemnified Party of
its intent to do so. If the Indemnifying Party elects not to defend against, negotiate, settle or otherwise deal
(as provided herein) with any Claim which relates to any Losses indemnified against hereunder, fails to notify
the Indemnified Party of its election as herein provided or contests its obligation to indemnify the Indemnified
Party against such Losses under this Agreement, the Indemnified Party may defend against, negotiate, settle or
otherwise deal with such Claim; provided, however, that the Indemnified Party may not settle such Claim without
the consent of the Indemnifying Party, which consent will not be unreasonably withheld or delayed. With respect
to any Claim, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party has agreed to
pay such fees and expenses; (ii) the Indemnifying Party has failed to assume the defense of such suit, action, or
proceeding or to employ counsel reasonably satisfactory to the Indemnified Party, or (iii) in the reasonable
judgment of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them, in any which case, if the Indemnified Party notifies the
Indemnifying Party in writing that the Indemnified Party elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such suit, action or
proceeding on behalf of the Indemnified Party.
(b) After any final judgment or award shall have been rendered by a court, arbitration board or Governmental
Entity of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, or the Indemnified Party and the Indemnifying Party shall have arrived at a mutually
binding agreement with respect to a Claim hereunder, the Indemnified Party shall forward to the Indemnifying
Party notice of any sums due and owing by the Indemnifying Party to this Agreement with respect to such matter
and the Indemnifying Party shall be required to pay all of the sums so due and owing to the Indemnified Party in
accordance with this Section 15.3.
(c) The failure of the Indemnified Party to give reasonably prompt notice of any Claim shall not release,
waive or otherwise affect the Indemnifying Party's obligations with respect thereto except to the extent that the
Indemnifying Party can demonstrate actual loss and prejudice as a result of such failure.
(d) All payments of Claims to an Indemnified Party shall be made by wire transfer of immediately available
funds within 10 Business Days after the date of the notice of sums due and owing provided for in Section 15.3.
15.4 Indemnification Non-Exclusive. The foregoing indemnification provisions are in addition to, and not in
------------------------------
derogation of, any statutory, equitable or common-law remedy any Party may have for breach of representation,
warranty, covenant or agreement or any other cause of action under this Agreement.
15.5 Indemnification in Case of Strict Liability or Indemnitee Negligence. THE INDEMNIFICATION PROVISIONS OF
---------------------------------------------------------------------
THIS ARTICLE 15 SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED UPON PAST, PRESENT, OR FUTURE
ACTS, CLAIMS OR LEGAL REQUIREMENTS AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM
INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE
PERSON SEEKING INDEMNIFICATION OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED UPON THE PERSON SEEKING
INDEMNIFICATION.
Article 16.
MISCELLANEOUS
-------------
16.1 Notices. Any notice, request, instruction or other document to be given hereunder by any party hereto
-------
to another shall be in writing and delivered personally or by confirmed facsimile transmission or sent by
registered or certified mail, postage prepaid, with return receipt requested, addressed as follows:
To CBB: Citizens Business Bank
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: X. Xxxx Wiley
Facsimile Number: (000) 000-0000
With a copy to: Manatt, Xxxxxx & Xxxxxxxx, LLP
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Quicksilver, Esq.
Xxxxx X. Xxxxxx, Esq.
Facsimile Number: (000) 000-0000
To Bancorp or Western: Western Security Bancorp
Western Security Bank, N.A.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile Number: (000) 000-0000
With a copy to: Horgan, Rosen, Beckham and Corer
00000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx, Esq.
Facsimile (000) 000-0000
Any such notice, request, instruction or other document shall be deemed received (i) on the
date delivered personally or delivered by confirmed facsimile transmission, (ii) on the next Business Day after
it was sent by overnight courier, postage prepaid; or (iii) on the third Business Day after it was sent by
registered or certified mail, postage prepaid. Any of the persons shown above may change its address for
purposes of this section by giving notice in accordance herewith.
16.2 Successors and Assigns. This Agreement and all rights, privileges, duties and obligations of the
------------------------
parties hereto may not be assigned or delegated by any party hereto and any such attempted assignment or
delegation shall be null and void. Subject to the foregoing, all of the terms and provisions hereof shall be
binding upon, and inure to the benefit of, the successors and assigns of the Parties hereto.
16.3 Counterparts. This Agreement and any exhibit hereto may be executed in one or more counterparts, all of
------------
which, taken together, shall constitute one original document and shall become effective when one or more
counterparts have been signed by the appropriate parties and delivered to each party hereto.
16.4 Effect of Representations and Warranties. The representations and warranties contained in this
--------------------------------------------
Agreement or in any List or Schedule shall survive the execution and delivery of this Agreement and the Closing.
16.5 Third Parties. Each party hereto intends that this Agreement shall not benefit or create any right or
--------------
cause of action to any person other than parties hereto. As used in this Agreement the term "Parties" shall
refer only to CBB, Bancorp and Western as the context may require.
16.6 Lists; Exhibits; Integration. Each Schedule, list, exhibit and letter delivered pursuant to this
------------------------------
Agreement shall be in writing and shall constitute a part of the Agreement, although Schedules, lists and letters
need not be attached to each copy of this Agreement. This Agreement, together with such Schedules, lists,
exhibits and letters, constitutes the entire agreement between the parties pertaining to the subject matter
hereof and supersedes all prior agreements and understandings of the parties in connection therewith.
16.7 Knowledge. Whenever any statement herein or in any list, certificate or other document delivered to any
---------
party pursuant to this Agreement is made "to the knowledge" or "to the best knowledge" of any party or another
Person, such party or other Person shall make such statement only after conducting an investigation reasonable
under the circumstances of the subject matter thereof, and each such statement shall constitute a representation
that such investigation has been conducted.
16.8 Governing Law. This Agreement is made and entered into in the State of California, except to the extent
-------------
that the provisions of federal law are mandatorily applicable, and the laws of the State of California shall
govern the validity and interpretation hereof and the performance of the parties hereto of their respective
duties and obligations hereunder, except that the provisions of the Agreement with respect to the Merger shall
also be governed by United States law.
16.9 Captions. The captions contained in this Agreement are for convenience of reference only and do not
--------
form a part of this Agreement and shall not affect the interpretation hereof.
16.10 Confidentiality. All Confidential Information disclosed heretofore or hereafter by any Party to this
---------------
Agreement to any other Party to this Agreement shall be kept confidential by such other Party and shall not be
used by such other Party otherwise than as herein contemplated, except to the extent that (a) it is necessary or
appropriate to disclose to the FRB, the Comptroller, the Commissioner, the FDIC or any other Governmental Entity
having jurisdiction over CBB, Bancorp or Western or as may otherwise be required by Rule (any disclosure of
Confidential Information to a Governmental Entity shall be accompanied by a request that such Governmental Entity
preserve the confidentiality of such Confidential Information); or (b) to the extent such duty as to
confidentiality is waived by the other Party. Such obligation as to confidentiality and non-use shall survive the
termination of this Agreement pursuant to Article 14. In the event of such termination and on request of another
Party, each Party shall use all reasonable efforts to (y) return to the other Parties all documents (and
reproductions thereof) received from such other Parties that contain Confidential Information (and, in the case
of reproductions, all such reproductions made by the receiving Party); and (z) destroy the originals and all
copies of any analyses, computations, studies or other documents prepared for the internal use of such Party that
include Confidential Information.
16.11 Severability. If any portion of this Agreement shall be deemed by a court of competent jurisdiction to
------------
be unenforceable, the remaining portions shall be valid and enforceable only if, after excluding the portion
deemed to be unenforceable, the remaining terms hereof shall provide for the consummation of the transactions
contemplated herein in substantially the same manner as originally set forth at the date this Agreement was
executed.
16.12 Waiver and Modification; Amendment. No waiver of any term, provision or condition of this Agreement and
-----------------------------------
the Agreement of Merger, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such term, provision or condition of this Agreement. Except
as otherwise required by law, this Agreement and the Agreement of Merger, when executed and delivered, may be
modified or amended by action of the Boards of Directors of CBB and Bancorp, and by CBB and Western,
respectively, without action by their respective shareholders. This Agreement may be modified or amended only by
an instrument of equal formality signed by the parties or their duly authorized agents.
16.13 Attorneys' Fees. If any legal action or any arbitration upon mutual agreement is brought for the
----------------
enforcement of this Agreement or because of an alleged dispute, controversy, breach, or default in connection
with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and other costs
and expenses incurred in that action or proceeding, in addition to any other relief to which it may be entitled.
16.14 Alternative Structure. Notwithstanding any provision of this Agreement to the contrary, CBB may elect,
----------------------
subject to the filing of all necessary applications and the receipt of all required regulatory approvals, to
modify the structure of the acquisition of Western set forth herein, provided that any such modification may be
effected only if (a) the consideration to be paid to Bancorp is not thereby changed in kind or reduced in amount
as a result of such modification and (b) such modification will not materially delay or jeopardize receipt of any
required regulatory approvals or any other condition to the obligations of CBB set forth herein.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed this Agreement as of the day and year first above written.
| ATTEST: | CITIZENS BUSINESS BANK |
| Β | Β |
| Β | Β |
| Β | Β |
| /s/ Xxxxxx X. Xxxxxxxx, Xx. | By:Β Β Β /s/ X. Xxxx Wiley |
| Chief Financial Officer | X. Xxxx Xxxxx |
| Β | President and Chief Executive Officer |
| Β | Β |
| Β | Β |
| Β | Β |
| ATTEST: | WESTERN SECURITY BANCORP |
| Β | Β |
| Β | Β |
| Β | Β |
| /s/ Xxxxxx X. Xxxxxx, Xx. | By:Β Β Β /s/ Xxxxxx X. Xxxxxx |
| Executive Vice President | Xxxxxx X. Xxxxxx |
| Β | President and Chief Executive Officer |
| Β | Β |
| Β | Β |
| Β | Β |
| ATTEST: | WESTERN SECURITY BANK, NATIONAL ASSOCIATION |
| Β | Β |
| Β | Β |
| Β | Β |
| /s/ Xxxxxx X. Xxxxxx, Xx. | By:Β Β Β /s/ Xxxxxx X. Xxxxxx |
| Executive Vice President | Xxxxxx X. Xxxxxx |
| Β | President and Chief Executive Officer |
EXHIBIT LIST
| A | AGREEMENT OF MERGER |
| Β | Β |
| B | THE WSCDC ASSET SALE AGREEMENT [TO COME FROM XXXX XXXXXX] |
| Β | Β |
| C | FORM OF LEASE AGREEMENT |
| Β | Β |
| D | FORM OF WSPI SALE AGREEMENT [TO COME FROM XXXX XXXXXX] |
| Β | Β |
| E | FORM OF OPINION TO COUNSEL FOR CBB |
| Β | Β |
| F | FORM OF OPINION TO COUNSEL OR BANCORP AND WESTERN |
| Β | Β |
| G | FORM OF SHAREHOLDER'S AGREEMENT |
| Β | Β |
| H | FORM OF NONSOLICITATION AGREEMENT |
| Β | Β |
| H-1 | FORM OF NONCOMPETITION AGREEMENT WITH XXXXXX XXXXXX |
